The consequences of Obama’s debt

November 2, 2012

This essay was submitted through the Romney campaign as a response to Lawrence Summers’ most recent column, “This election, Obama is the wiser economic choice.”

The large budget deficits and expansion of the national debt under President Barack Obama, unprecedented since World War II, have him set to bequeath an immensely costly legacy. Each of his deficits as a percentage of gross domestic product has been larger than the previous post-World War II record, for which Democrats excoriated President Ronald Reagan. Between the debt already racked up and what Obama’s FY13 budget projects, each income-tax-paying family will owe more in Obama debt than a new mortgage on a median-priced home and four years of college costs.

Yet more than three years into recovery from the recession, the president has not proposed a program to deal with the massive debt. Indeed, he abandoned even the long-run goal of a balanced budget, adopting the much weaker goal of stabilizing the debt-GDP ratio at the higher projected FY2016 level. But he did not budget for it, appointed the Simpson-Bowles Commission to propose how to do so, then ignored its recommendations. He has no serious proposals to deal with the even larger eventual long-run deficits in Social Security and Medicare, which total several times the current national debt. When Treasury Secretary Timothy Geithner was asked by Congress what the administration’s plan was, he said, “We don’t have one.” Vice President Joe Biden guaranteed, “No changes to Social Security.”

The government has been borrowing to cover 30 percent to 40 percent of its budget, hiding the true tax cost of government spending from voters. The $5.5 trillion in debt already accumulated in Obama’s first four years implies a future $5.5 trillion tax hike (in present discounted value). The projected future deficits and debt likewise add up to another immense tax hike, with marginal tax rates eventually reaching 70 percent for many middle-income families. That’s because every dollar borrowed requires future interest be paid; so unless future spending is cut, future taxes must go up to cover the interest.

The prospect and then reality of higher tax rates, plus increased uncertainty about fiscal policy, slow growth and raise the specters of higher inflation eroding the value of the government debt and even a financial crisis. Higher debt above a modest level slows growth because it eventually crowds out investment, and the lower capital formation reduces future incomes. How serious are these negative consequences of Obama’s debt buildup likely to be?

Obama’s Office of Management and Budget provides long-run deficit and debt estimates based on the administration policies, as implemented and proposed, continuing. These include his tax increases, health policy and, importantly, the absence of Social Security and Medicare reform. Combining these estimates into a realistic projection ‑ but with more optimistic growth and healthcare cost containment assumptions than those in the Congressional Budget Office Alternative Fiscal Scenario ‑ drives the (publicly held) debt-GDP ratio, currently 73 percent, over 90 percent next decade, 100 percent immediately thereafter and over 200 percent of GDP around 2050. For comparison, that is well beyond Greece today. Many economists believe the high debt burdens harm the economy considerably more when debt gets above 90 percent or so of GDP. At the end of 2008, it was 40 percent.

The International Monetary Fund estimates the harmful effects of debt on growth at  just under 0.2 percent per year for each 10-percentage-point increase in the debt-GDP ratio. The president’s policies, if continued, would bring growth to a halt by 2050, at a level of GDP 30 percent lower than if his debt-explosion policies had not been continued. That’s most of a generation of per capita income gains wiped out, or, put another way, it is as large as the gap between American and lower Western European per capita incomes. Left unchecked, the average projected annual per family hit would be about 30 percent of income by the time today’s kids are in the midst of their careers. Even if the effect of debt on growth is just half that estimated by the IMF, the Obama[r9]  debt accumulation has severe negative consequences for future living standards.

The debt increase under President Obama, plus the administration’s own projections of debt based on his policies continuing, should concern everyone, rich, poor or middle-income, urban or rural, young or old, Republican or Democrat. Failing to rapidly begin bending the long-run debt-GDP curve down risks a growth disaster, a lost generation of growth whose severity would be much worse even than the recent deep recession and tragically anemic recovery.

Fortunately, if Obama’s policies (including the absence of Social Security and Medicare reform) are reversed by his successors and the debt-GDP ratio lowered, the harmful effects will be attenuated. While substantial long-run damage would already have occurred, the economic “gain” from the political “pain” of controlling the budget is enormous. Mitt Romney and Paul Ryan offer a clear alternative of balanced budgets and debt reduction. The choice of fiscal and economic future could not be clearer.

PHOTO: Copies of U.S. President Barack Obama’s Fiscal Year 2013 budget are seen stacked inside the House Budget Committee room on Capitol Hill in Washington February 13, 2012. REUTERS/Larry Downing


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I respect any credentialed individual from Stanford. With the explicit exceptions being economics and politics.

This sad and weak rebuttal to Mr Summers is a splendid example.

I would point out to Dr Boskin that from a Kenseyian perspective he and I are both already dead. So any belly aching about “debt” is just that. And I would ask Dr Boskin what his position on debt was when George Bush II and Congress cut taxes DURING our socalled war against Iraqis. Or what feelings he might have had when Bush helped bailout the banks.

“Obamas DEBT”?

Posted by krimsonpage | Report as abusive

“Obama’s debt” was caused by Bush’s Great Recession, which significantly reduced revenues and caused otherwise unneeded expenditures.

Posted by Leftcoastrocky | Report as abusive

This is particularly a laughable commentary from the Romney camp, that has become perfectly typical from Romney himself.

It waxes poetic about the dangers of Obama’s debt, and his unprecedented deficit. But like everything coming from Romney, all that is said is “Obama is bad and we can do better!” With the exuberant enthusiasm of a child.

While that is a good attitude to have, most adults would like a plan. Rather than failed polemics, any reasonable adult should want a plan. Improving the deficit and reducing the debt are laudable goals. But merely saying you intend to do so without any plan to do so is no more deserving of praise than a dog is for barking.

Yes, Romney / Ryan is little better than a magician promising everyone a pony at a child’s birthday party.

Posted by Hachiroku | Report as abusive

@krimsonpage/Leftcoastrocky: BushII got us into this mess (with help from predecessors who planted slow-growing seeds of trouble, e.g. Clinton by repealing Glass-Steagall). But Obama hasn’t got us OUT of this mess, and he appears unable to do so. So it’s cold comfort to all the Americans who have given up looking for work, knowing who to blame for this…
15% federal taxation by GDP.
24–25% federal spending by GDP.

These numbers have hardly budged during Obama’s presidency! So if we’re now experiencing economic “recovery”, then it’s a sham recovery paid-for by more debt, setting America on a trajectory for a high-debt future, putting your children and grandchildren in significant financial bondage; or, alternatively, setting America on a trajectory for debt-default and the possible dissolution of the current American domination of world trade with similar consequences. Pick your poison because Obama isn’t fixing this problem: he never apprehended the sheer urgency of it all!

Posted by matthewslyman | Report as abusive

Your references to Obama’s borrowing and the entitlement programs are both incorrect and disingenuous.

The entitlement programs were commingled — transferred to the main budget — during the Johnson years to cover the excess spending on both Vietnam and Johnson’s Great Society, but the taxes for NEITHER one were ever raised.

Since then the entitlements programs have been used by the government as a slush fund, which worked as long as the economy was expanding.

But since it has crashed, there is NO way the US government can possibly repay funds that no longer exist in the trust fund.

You, sir, are a liar!

What needs reforming is not Social Security — they already did that several decades ago to adjust for the baby boomers, but the government couldn’t keep its sticky fingers off the trust fund — but OUR GOVERNMENT!

Posted by Gordon2352 | Report as abusive


I come from a computer science + natural sciences background, with some training in statistics. I am self employed developing specialist engineering calculation software and business reporting tools.
I’ve been studying (graphing, cross-correlating, differentiating & integrating…) US economic figures from,, market data etc.
My own analysis falls exactly in line with what you have written here, leading me to conclude that current policies & plans (if continued for another presidential term) would ultimately result in a new federal debt equilibrium at around 200%GDP (with perhaps more US external debt per-GDP or per-capita, than Japan!)

> “While substantial long-run damage would already have occurred, the economic “gain” from the political “pain” of controlling the budget is enormous.”
There’s no solution to this problem that doesn’t involve pain. I recently read an opinion piece on where the writer suggested that a little more debt now will have negligible consequences in the future (so that we should stop worrying about it and spend more to boost the economy)! Many nations have tried out that philosophy and found it wanting: like ignoring a gas leak in your home where a sudden explosion can wipe out everything you own, ignoring national debts & deficits can result in massive overnight devaluations once the government (or other profligate party) runs out of options for hiding their economic fraud, or for postponing the day of reckoning: YOUR SAVINGS AND INCOME CAN BE WIPED OUT OVERNIGHT, and this can happen to millions of people at the same time!

With 8.7%–10% deficit-by-GDP for each year of his tenure so far (and the deficit reduction plan on such a shallow trajectory due to Obama’s massive new spending programs); the Keynesian medicine has not worked for the USA so far, this time around. It might have softened the recession, but it has done so at significant & increasing cost, with diminishing real return-on-investment. There is a reason for this. The reason is partly explained in the article above…

“The International Monetary Fund estimates the harmful effects of debt on growth at just under 0.2 percent per year for each 10-percentage-point increase in the debt-GDP ratio.” — When debt gets past a certain point, it becomes the main factor determining what kind of economic medicine can work.
A medical analogy: America has been on stimulants for so long now, that even an extra-strong cup of coffee cannot help any more!
Anti-cyclical medicine can no longer help when cyclical forces are no longer the dominant factor holding back the economy.

Last month, I thought briefly about investing money ($750 or so — we don’t have a lot of money and can’t afford big losses) in the shares of a major US corporation in a market I understand (to diversify from a small positive cash position, due to inflationary monetary policies). But then, an analysis similar to yours immediately got the better of me: I thought:
“Why invest in a jurisdiction/ currency area where the economic situation is so precarious due to worsening government debt position >100%GDP, and where the currency may be devalued due to trade balance effects?” — So I gave no more consideration to the idea. It’s just out of the question. So instead, I’m sitting on a little cash in the bank put aside for our next family car next year. I have absolutely NO doubt that similar thinking is already exerting an unseen drag on the American economy, on a much larger scale.

“Staying the course” is NOT an option for America. The medicine is NOT working… I believe that the only way to start restoring real business confidence now is to install some fresh faces at the top and bring out a credible bipartisan plan for stabilizing and ultimately paying down the debt in the medium term. OTHERWISE, US growth will be slow and the genuine recovery eventually required will be all the more painful…

Posted by matthewslyman | Report as abusive

@Gordon2352: Thank you for the interesting history lesson. I might look into that in more detail later!

Posted by matthewslyman | Report as abusive

Matthewslyman, you have posted one of the most thoughtful comments that I have had the pleasure of reading in recent times (and I peruse a lot of finance/economics sites). You make many insightful points.

You’re right to say that there is no solution to these problems that doesn’t involve pain. Therein lies the problem, nobody in politics will say that! For good reason. They’ll be thrown out of office. The public wants a solution that causes pain for the “other guy” if at all.

As for your balking at stock market investments, I strongly agree.

I also agree that we need some fresh faces but those fresh faces are as yet unknown. The pain will need to be much more intense and felt by a much broader segment of society before the status quo has much to worry about.

Posted by Missinginaction | Report as abusive

“The prospect and then reality of higher tax rates, plus increased uncertainty about fiscal policy, slow growth…”

Then why is the US growth rate exceeding that of the EU, UK, Ireland, etc., that have placed priority on controlling deficits in the midst of recession?

And in any case, “uncertainty about fiscal policy”, i.e. taxes and spending, is more to do with irresponsible bomb-throwers in Congress than with any Obama “policy”. In the words of Grover Norquist, “All we [need out of President Romney] is enough digits to handle a pen.”

Posted by maximillianwyse | Report as abusive

The Hoover Institution. Where have I heard that name, Hoover, before?

Posted by borisjimbo | Report as abusive

@krimsonpage/Leftcoastrocky: Deflecting about Iraq or any historical event does nothing to change decisions made by This Administration. The problem of Debt was already becoming an issue and the Tea Party was started. IT WAS THEN PROMPTLY HIJACKED BY RIGHT WING IDEOLOGUES. The failure to take spending into account is 100% on President Obama and the leadership of the Democrats under Reid, Pelosi, Shumer, and enabled by Geitner and Bernanke.

@matthewslyman You have posted a very detailed and lucid explanation of out problem. You state the truth in that Pain will be involved inevitably before we are stable again. My Government has overspent for most of my adult life and we have a mess to show for it. Lyndon Johnson was the architect of our eventual collapse should we fail to make the right choices now and for at least a generation. How different this country would be if one vote more had been cast for a balanced budget amendment little more than a decade ago.

Posted by DennisVictor223 | Report as abusive

@matthewslyman: Of course a little pain is necessary to get us out of the public debt hole, but the pain must include higher taxes — mostly, but not exclusively, on the very wealthy — eliminating tax avoidance by corporations, and spending cuts, particularly in the “wars on whatever” areas. Now, which politician of any stripe do you think will sign up to such a regime?

Posted by PCScipio | Report as abusive

I am thoroughly unimpressed with this glib and facile manipulation of both economic facts, history and politics. This is the Clint Eastwood School of Economics. Where he blames Obama for getting us into Afghanistan, you blame Obama for every economic ill of the last two decades. Reading this one would think that the Republican Party was created in January 2009 and are blameless and pure and lily white.

Posted by IntoTheTardis | Report as abusive

These kinds are articles are so idiotic. I’m sure there is a ‘balanced’ representation of candidates behind letting this mularkey be published. Here’s the bottom-line. Spending is perhaps a bit high right now – war and bloated war budgets can do that – but revenues are positively abyssmal. Reversing ALL the Bush43 tax cuts immediately (raising revs from 14-15% to 18-19%) and slashing the defense budget (which, including wars comes to 6% down to 3%) would cut the deficit down to nearly NOTHING! Any politician have the will for that – no chance, but the fiscal cliff does it for them. All hail the fiscal cliff. We always knew that correcting the ugly budget would take some sacrifice… time to eat our peas

Posted by CDN_Rebel | Report as abusive

There is another article in Reuters which bears directly on this discussion in terms of “entitlements” that is very much worth reading.

It is called “The war over entitlements”. 12/11/02/the-war-over-entitlements/#comm ent-65560

I posted the following comment to that article.


Thank you so very much for telling the truth behind the pejorative propaganda being spread by the wealthy-controlled government.

NOTHING of what the government says about the “entitlement” programs is true.

EVERYTHING that is “wrong” with the programs is due ENTIRELY to government manipulation and criminal mismanagement — this is an accurate charge, since if a fund manager had done what the federal government has done, he would be brought up on a variety of criminal charges — of the Social Security funds.

And now, when the government CANNOT pay back the Social Security funds they have stolen — and used them as a “slush fund” to vastly overspend their normal budgetary constraints for decades — they are attempting to evade having to pay the benefits rightfully owed to those who paid in to Social Security by payroll taxes.

What NO ONE in the wealthy-controlled media will tell you is that the Supreme Court has ruled that Social Security is “property” and thus “imposes constraints on governmental decisions which deprive individuals of “liberty” or “property” interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment.”

(Wikipedia) “Mathews v. Eldridge, 424 U.S. 319 (1976), is a case in which the United States Supreme Court held that individuals have a statutorily granted property right in social security benefits, that the termination of those benefits implicates due process,

That means the government does NOT have the right to deprive Social Security benefits from those entitled to them.

To do so would violate the US Constitution that protects us all from “unlawful seizure” of our private property.

From Cornell Law School: storics/USSC_CR_0424_0319_ZO.html



Procedural due process imposes constraints on governmental decisions which deprive individuals of “liberty” or “property” interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment.

The Secretary does not contend that procedural due process is inapplicable to terminations of Social Security disability benefits.

He recognizes, as has been implicit in our prior decisions, e.g., Richardson v. Belcher, 404 U.S. 78, 80-81 (1971); Richardson v. Perales, 402 U.S. 389, 401-402 (1971); Flemming v. Nestor, 363 U.S. 603, 611 (1960), that the interest of an individual in continued receipt of these benefits is a statutorily created “property” interest protected by the Fifth Amendment. Cf. Arnett v. Kennedy, 416 U.S. 134, 166 (POWELL, J., concurring in part) (1974); Board of Regents v. Roth, 408 U.S. 564, 576-578 (1972); Bell v Burson, 402 U.S. at 539; Goldberg v. Kelly, 397 U.S. at 261-262.

Rather, the Secretary contends that the existing administrative procedures, detailed below, provide all the process [p333] that is constitutionally due before a recipient can be deprived of that interest.

This Court consistently has held that some form of hearing is required before an individual is finally deprived of a property interest.


By “recasting” them as somehow being a scam by those who do not deserve to live out their lives with a minimum safety net of income and health care, the government hopes to set the stage of public opinion to deny paying out the benefits to their rightful recipients altogether.

The real truth is the US government is BROKE, and it CANNOT pay Social Security to the baby boomers!

But that is something they also CANNOT admit for fear of public reaction.

The current strategy — and this is REALLY important — is Congress knows it cannot legally deny paying benefits to those who have already paid in to Social Security, but they CAN manipulate and “restructure” the taxes and payments going forward to the baby boomers so that it has the same net effect of seizing private property, while not seeming to do so.

So, the BIG LIE of “entitlements” is being pushed in an attempt to evade their legal responsibility to the American people.
Posted by Gordon2352 |

Posted by Gordon2352 | Report as abusive

Here is another article in Reuters that gives the historical perspective for what is happening right now. It is worth reading.

It is entitled Vote is referendum on the New Deal. 12/11/02/vote-is-referendum-on-the-new-d eal/

It explains quite well why the “entitlements” programs are being attacked.

Posted by Gordon2352 | Report as abusive

I want you all to understand that I am NOT against Social Security reform. I DOES need to be reformed, BUT not the way the government wants to do it.

Cutting benefits and extending the time until Social Security can be collected simply pushes the problem onto our children and grandchildren to deal with.

It would create a significant “gap” between when a person can retire — or more likely needs to retire due to increasing layoffs in this economy or ill health that prevents them from working — which will only serve to exacerbate the social problems we have now.

For example, if a person is forced to retire, but has not yet attained the legal retirement age, how can they survive — especially if all the other social programs are cut, which is a high probability?

Elderly people and not so elderly people (e.g. due to losing one’s job before being able to retire) will cause massive dislocations in the US economy as people begin to lose their homes (or apartments as the case may be) and be forced onto the streets to survive as best they can.

This is NOT a worse-case scenario, but a highly probable scenario if we proceed with cutting what little safety net we have beginning next year.

That will tend to destabilize this government and create social problems of long-term unemployment with no health care at all, thereby creating a best-case scenario of Greece, for example.

That will put EVERYONE in this country at risk.

I propose:

(1) As a precondition to reform, completely remove Social Security, Medicare and Medicaid from government control. The government has been unable to prevent itself from manipulating the Social Security program since it first began in 1927.

THAT record does not bode well for the success of the government’s latest proposal to solve entitlements.

I will guarantee you that in a few years down the road we will be revisiting this problem again if we allow the government to apply its fix, PLUS we get the added bonus of a destabilized nation to deal with, which we do not have now.

(2) REMOVE THE CAP from Social Security so that it functions like the real social insurance it was meant to be. Yes, that means people like Bill Gates would have to pay their “fair share” of Social Security, even if they never need it. The wealthy class needs to recognize its primary responsibility is to THIS COUNTRY, not the global economy and their hidden hoard of wealth they refuse to share.

(3) Once the cap has been removed and the fund legally separated from government control, the real amount of adjustment in terms of taxes and benefits can be made. This CANNOT be done while it is commingled with the general fund.

My guess is that Social Security would immediately produce a surplus IN YEAR ONE after these changes are made. Yes, it has produced surpluses in the past, but those have been destroyed by government meddling.


As a bonus to the American people, once the “red herring” of entitlements is removed, we can then readily identify the REAL excess spending in the government budget.

I think that will be the enormous spending on the Military/Industrial Complex, which is the REAL reason why the government wants to use “entitlements” to confuse the issue of their profligate military spending.

Posted by Gordon2352 | Report as abusive

@borisjimbo: I take it you are an Obama supporter. I have a riddle for you.

• President Herbert Hoover was an economic disaster zone — his policies were largely responsible for the worsening & continuing depression. On the other hand, President Franklin D. Roosevelt implemented new policies almost wholly responsible for the recovery: for evidence, observe how quickly the economy (first GDP, then employment) turned around AFTER he came to power…
• Four years is not long enough for any president to fix a crisis as big and as bad as the Great Depression… Obama cannot be blamed for the continuation of Bush II’s recession/depression.


The Wikipedia entries associated with Herbert Hoover, Franklin D. Roosevelt, New Deal etc., have some interesting material:
• Recounting Herbert Hoover’s apolitical compassion on the starving people of Russia, in their great famine of around 1921;
• Suggesting that although FDR’s policies were called “New Deal” (a necessary political measure to influence popular perceptions, and reverse destructive economic herd instincts based on gut feelings expecting a run of bad luck to continue); many of the measures actually had their roots in initiatives started by Herbert Hoover.

— perhaps something to bear in mind next time you feel inclined to criticize someone because of this kind of association. Herbert Hoover was a good man. He just didn’t know how to finish the job of fixing the great depression…

Posted by matthewslyman | Report as abusive

These economic advisors bring shame to rather respectable institutions like Harvard, Stanford and the likes and should be barred from this type of party-line rhetoric for fee or free. They are only minimizing any ounce of credibility left with their biased nonsensical analysis without well balanced analysis that is based off the fundamental root-causes and a balanaced view on the actaul barries in addressing these root-causes head-on.

Posted by Mott | Report as abusive

@krimsonpage, @Leftcoastrocky, @IntoTheTardis: Almost everyone is by now fully aware of how bad GWBush’s policies were for the American economy. The Americans already voted, quite rightly, for a discontinuation of Bush II’s policies.

This article is specifically about OBAMA’s debts; or in other words, the debts accumulated from money that he has chosen to spend, which he could have chosen not to spend; and the further debts likely to accrue from a continuation of Obama’s policies and style of leadership. I don’t think Dr. Boskin would have any problems writing a separate article about Bush II’s debts or the debts of any other recent US president; if you ask him nicely…

Posted by matthewslyman | Report as abusive

So, right econimists say free enterprise and business are always correct in matters of money. My question is this: The big business experts say buy low sell high. This is one of the always true rules to live by. Why should the government not follow good business practices, spend when money is cheap, cut when money is expensive? You were all voting to spend massive sums of money on unecessary wars, pharma welfare, and tax cuts for job creators, when money was expensive, but want to pay down the debt when money is cheap? This seems to contradict what you claim is always true, which is it?

Posted by ExRepubIndie | Report as abusive

@ matthewslyman —

Nice to know not everyone believes the “revisionist” version of history fed to the masses.

As you say, “Herbert Hoover was a good man”, and if they had given him a chance to fix the problem, one which had never occurred before on that magnitude, he probably could have done it. After all, much of the “New Deal” was based on Hoover’s ideas that he never had the chance to implement.

He was only in office a few months when the Crash in 1929 occurred, mostly as a result of the loose monetary policies of the Republican presidents before him, but he got the blame.

So, “he (did) know how to finish the job of fixing the great depression…”, but never got the chance, mainly because the Republicans needed a scapegoat to cover up what they had done during the Roaring 20s.”

This country actually owes Herbert Hoover a great debt it can never repay for all he did for the nation and the world.

He was probably one of the finest presidents this country ever had. ver

Posted by Gordon2352 | Report as abusive

People sometimes defend Obama by pointing the finger at Republicans in Congress; but they appear to forget that Obama can refuse to sign bills presented on his desk… Take a look at this: ted_States_presidential_vetoes

Of all presidents, Franklin D. Roosevelt used the most vetoes of any president; with a comparatively small proportion overruled! So if we are going to credit Roosevelt with the recovery from the Great Depression, then we ought to say that strong vision, negotiation & leadership are necessary in a crisis like this.

President Obama, on the other end of the spectrum, has used fewer vetoes than any president since James Garfield (1881); whose opportunities for using his veto were apparently limited by being assassinated within months of taking office.

Posted by matthewslyman | Report as abusive

@PCScipio: Let me outline some facts, and then we’ll see if we can answer your question.

> “…the pain must include higher taxes — mostly, but not exclusively, on the very wealthy…”
— CORRECT. I wrote an article entitled, “Reaganomics and prudent taxation”; in which I use US economic data for the period 1950–2011 to show that increasing the overall rate of federal taxation per GDP would almost certainly BOOST GDP-growth! This somewhat counter-intuitive correlation should hold ESPECIALLY true in the current deficit=debt=confidence crisis and at the current juncture; IF ONLY the extra revenue is wisely spent.

The economic data say a lot of good things about Democratic presidents and their policies between 1930 and 2008 (they all outperformed their Republican predecessors in some respects; although some Democratic presidents used dubious methods to do so, for example LBJ who started the Vietnam War with a falsified casus belli, reducing unemployment, before unemployment spiked again when his Republican successors ended that war; and some Republican presidents like Bush I were partly responsible for the gains realized under their Democratic successors; so the picture is not as simple as a casual reading of history would persuade us to believe).
Unfortunately, this trend for good economic numbers has not continued with the Obama administration. Americans rightly voted for change four years ago, but instead got a continuation of BushII-era economic policies which we now know to have been an abject failure; because Obama has been out of his depth and has allowed himself to be bamboozled, outmaneuvered and diverted into wasting legislative effort & tax dollars on pet projects. He should have fixed the economy first and then implemented his grand vision for investing in America; but instead he put the horse before the cart, and now we’re in the ditch (a legislative quagmire of finger-pointing). He hasn’t budged the deficits. This is not the vision he sold us prior to getting elected. We have Obama forcing through new spending programs whilst allowing Congress to do this:  /irs-warns-of-busy-signals-weaker-enfor cement-amid-budget-cuts.html
…This, despite IRS staff having been shown to give the government a very high marginal rate of return on investment!!! It’s no wonder the crisis isn’t fixing itself.

Astute readers will notice that there is more than one way to increase taxation as a proportion of GDP. Based on previous Reuters Opinion articles (especially by David Cay Johnston), the DEDUCTIONS (deductibles from taxable income) that are employed by some highly profitable corporations are so pervasive that they legally pay almost nothing in tax, year after year! These deductions (and other short-sighted special deals struck to poach corporations across state lines) allow large corporations with legions of accountants to compete unfairly against small businesses; undermining the American tax base, unnaturally concentrating trade arbitration power in the hands of a few giant corporations and killing small businesses. Similarly, some very wealthy individuals aggressively using legal tax avoidance schemes to hide income they could NEVER have earned in the first place without coupling their hard work with the protection + facilitation of taxpayer-funded initiatives. CLOSING ABUSIVE DEDUCTIONS (used mostly by the wealthy) would have a powerful effect on the bottom line tax bill of tax avoiders, while having little negative impact on those following the spirit of tax law in full faith.

After failing to close these loopholes (or in some cases, aggravating them); Democrats have been unimaginatively negotiating for increases in marginal rates of income tax, capital gains tax etc. Modestly increasing the capital gains tax might help beneficially temper short-term speculative market activity while raising revenue, so there’s some merit to the Democratic Party’s approach; although increasing marginal income tax rates would be a blunt instrument for increasing revenue — this strategy would not directly attack the real problem: see the previous paragraph. Worse, increasing the marginal rates could hit law-abiding people while doing almost nothing to tighten the noose around aggressive tax-avoiders (putting law-abiding people at an even worse competitive disadvantage).
Romney, on the other hand (while promising NOT to LOWER taxes on the wealthy), claims to have identified certain deductions as his primary target for revenue reform. It would be nice to know more about which deductions he plans to eliminate, but it was right for him to keep his cards close to his chest and thereby let Obama show everyone how little he actually UNDERSTANDS about economics (how do you negotiate a deal with Congress on a subject where you don’t even know the basic rules of the game?) Given Romney’s business background, we should not be the least surprised to find that he had been able to identify unjustifiable deductions that the Obama administration had overlooked. We ought to be surprised if any top-tier US politician knows more than Romney about how corporations minimise their tax bills.

Romney wants to make the spending cuts that America needs, starting with the programs that do the least to invest in America for the long term; so cutting everything that fails this simple test:
“Is it worth borrowing more money from China to pay for this?” — anything that fails this test will get the chop (the same way decisions would be made in a family or in a business during a similar kind of crisis, or, the same way decisions are made in any rational government). Anyone thinking this policy might destroy the tender shoots of American economic recovery should ask themselves what good it did America to throw money at projects like Solyndra without making sure the taxpayers got a good deal for their investment! Romney has the good sense not to do things that way; especially during a financial crisis with government deficits almost at its epicenter. Any competent man of his profession would always ask,
“What’s the return-on-investment for this project?”, and:
“What are the comparative benefits & disadvantages of the alternatives? Can we get a better deal for the tax payer?”

Posted by matthewslyman | Report as abusive

Obama’s debt? Who are you kidding? Back in 2000, we were on track to pay off our entire national debt by 2010. The administration of George W. Bush obliterated that prospect with 2 unfunded wars and a massive tax cut that has yet to deliver the stellar economic growth promises made on its behalf. That administration handed our President a massive problem and we are all lucky that he has handled it as well as he has. If it weren’t for Obama our debt situation would be far worse.

Posted by marcuselectric | Report as abusive

> “…spending cuts, particularly in the “wars on whatever” areas…”
I’ll give a briefer answer because this isn’t directly related to the subject of the article; and because I’m no soldier (though a few of my family members and friends have served in the police and armed forces).

I felt reassured when Romney rightly praised many aspects of the Obama administration’s foreign policy (Hillary Clinton has done a fine job of articulating American values in a friendly but firm way, thereby projecting soft American power around the world so as to extend & defend the “pax Americana”.) Respectful dialogue costs little but saves America and the rest of us from wasting untold amounts of treasure and lives.

The question of warfare worries me because historically speaking, large-scale conflicts tend to follow economic crises (especially those involving high unemployment). Hard experience has shown that the United States as a leading economic power cannot be a neutral spectator to the horrors of human conflict elsewhere, because sooner or later, greedy or malevolent eyes perceive your weakness and those conflicts will come to your shores, as demonstrated by the Japanese attack on Pearl Harbor or the Al Qaeda attacks on American embassies and infrastructure. So America had better be prepared for any & all eventualities, with credible deterrents against conventional or non-conventional, symmetric or asymmetric attack.

I agree with your point that America must be smart about choosing its battles (it’s no use, after a 9/11 style attack, to respond almost immediately like an angry beehive, lashing out against any large bystanders like Iraq who appear to be hostile; or to behave like the Israeli Army in their recent wars in Lebanon and Gaza, in arguably disproportionate reactions to kidnappings of their soldiers — note that while Saddam’s dictatorship was brutal and while the kidnappings were wrong, each of these conflicts may be rated as partial strategic defeats for the aggressors since the aggressors lost the sympathies of other nations by instigating these conflicts.)

Obama has left other nations to take the leadership in some of these matters, where traditionally America might be expected to take a stronger role. (Sarkozy of France was magnificent in preventing the annihilation of Benghazi. While the US Embassy there was attacked after the conflict, most people in Benghazi reacted to that news by forcing out the extremists in their midst: thus, US values achieved a measure of strategic victory with local sympathy in Libya, alongside the tactical losses we’ve all been discussing.) It would have been interesting (even if only post-Libya, due to the urgency of it all) to have a proper debate about the President’s powers to wage warfare without explicit congressional authorization in cases where there are “no boots on the ground”; but we haven’t had that debate yet, have we? Excuse me if I missed something here.

The current blood-bath in Syria (and before that, similar bloodbaths in Yugoslavia and elsewhere) show that Russia’s & China’s professed approach of “non-interference in foreign countries’ domestic affairs” is not always the best way to ensure peace. Supplying arms to extreme jihadis is a terrible idea; but on the other hand, failing to “take sides” with civilians facing slaughter, or leaving conflicts to fester as equally matched sides slug it out with each other, can foster extremism that can hurt everyone in the long run. These are not always simple questions, but for the most part, Obama’s administration has taken a wise and justifiable approach. (Gaddafi’s threats to the civilians of Benghazi made such a clear case, I find American ambivalence about war rather strange in that case — but who knows, maybe there’s something I’m missing by NOT being privy to any classified details about how those negotiations & preparations were conducted.)

Obama was prematurely awarded the Nobel Peace Prize (perhaps improperly so), and has succeeded in conducting his presidency in such a way as to avoid having that award rescinded. We can have little doubt that a Romney administration would be a little tougher on some issues and over some brewing conflicts. I do believe Romney in his suggestions that he wants to continue the good work Obama and Clinton have been doing. I can’t personally foresee him starting conflicts without a good reason; as he generally seems to be a measured man, sensible in listening to both sides of an argument, and nuanced in his approach in deciding a way forward.
In any case, even in my cynical moments, I can’t see Romney exempting matters of warfare from his promised method of decision-making:
“Is it worth borrowing more money from China to pay for this?”

Posted by matthewslyman | Report as abusive

@PCScipio: There are the facts as I personally perceive them. Sorry if I have been a bit too forward in expressing my opinions, or have crowded anyone out from this discussion. I just hope some of these perspectives will help you find or identify that “politician of any stripe”, who is on your shopping list!

Posted by matthewslyman | Report as abusive

@ matthewslyman —

It appears you are a Republican zealot, regardless of the facts that whenever Republicans have been in office, they have loosened monetary controls which has resulted in excessive speculation that always results in economic panics and crashes.

You state “Romney wants to make the spending cuts that America needs, starting with the programs that do the least to invest in America for the long term”.

Setting aside the issue of taxes for the moment, I would be interested in knowing what you think those “spending cuts that America needs” are — exactly — and why.

Posted by Gordon2352 | Report as abusive

Obamadebt? Another tired misnomer from an apologist. This is OUR debt, American debt created by a majority of 535 duly elected representatives. Similarly, there is no such thing as Bushdebt or Bush tax cuts. All of our spending is crafted by Congress. All borrowing and raising of the debt ceiling is approved by Congress. And Congress is US, you and me, according to our system of representative democracy. We are in a terrible fiscal predicament, but there is really no one to blame other than ourselves. (Personally, I am in favor of letting the fiscal cliff occur in the next two months.)

Posted by justine184 | Report as abusive

@Gordon2352: Since you have asked, I am neither Republican nor Democrat. I am British. In our elections, I’ve voted for candidates from all parts of the political spectrum (depending only on which candidate I thought to have the best character, or which I though best qualified). I will not be voting in your election; and as long as you come to a considered conclusion (which might favor any candidate); I’ll respect your decision to vote for whichever candidate you choose!

Have you read my article? If so, I am bemused that you could still accuse me of being a “Republican zealot” (I actually expected people reading THAT to accuse me of being a Democratic zealot). I’m just a curious person who likes to understand the reasons why things happen. Like you, I’m a firm believer in the principle of understanding history so as to build a better future… I think it’s vitally important for us to accept true principles and live by them, without prejudice to the source of those truths.

@PCScipio: One more reflection on your comment, to round off what I’ve written above. The 1950’s and 1960’s were periods of high economic growth, increasing equity between rich and poor, with a growing middle class; yet these decades were also periods with high taxation on the top marginal tiers of income and capital gains. It’s quite reasonable to conclude that we need a return to the economic principles that helped create the conditions for growth (especially now that new technology is helping to amplify differences between rich and poor). Everyone needs a chance at success, or we will waste a lot of the human capital/ congenital talent that might have brought us great economic & cultural growth. Everything I’ve written above still stands (I DON’T believe Obama’s policies or style of leadership can make America back into a land of general opportunity for all, but I DO personally believe that Romney’s leadership might take you a good part of the way there). Still, I’d be interested in learning what Dr. Boskin thinks of this comparison. @Dr.Boskin?

@justine184: Interesting perspective. All the more reason to choose carefully this time around, and to persuade our neighbors to make their own carefully considered choice…

Posted by matthewslyman | Report as abusive

@ matthewslyman —

You assume I don’t know who you are. I am well aware you are not “simply” another commentator in this discussion.

It is your statement that I want you to justify.

“Romney wants to make the spending cuts that America needs, starting with the programs that do the least to invest in America for the long term.”

Please, answer my question:

Setting aside the issue of taxes for the moment, I would be interested in knowing what you think those “spending cuts that America needs” are — exactly — and why.

Posted by Gordon2352 | Report as abusive

@ matthewslyman —

Unless there is another person with your exact name, your comments to others are somewhat disingenuous, since you are obviously quite a prolific writer.

None of information details your education or experience to be so knowledgeable about so many topics.

Perhaps your affiliation with the Mormon Church may have something to do with your desire to sell the US a “bill of goods” like Romney?

Posted by Gordon2352 | Report as abusive

@ matthewslyman —

I forgot to ask you is your last name “Slyman” — i.e. Sly Man — your real name or your pseudonym so that no one can determine who you really are?

Posted by Gordon2352 | Report as abusive

@ matthewslyman —

Or, how about this one? w_of_cambridge

And, of course, the “Mother Lode”.

Affiliations / Alma Maters
A sense of identity gives us standards to aspire to, a sense of belonging and valued associations with like-minded people sharing common goals. Because all men are brothers and sisters; my sense of national, religious and general identity comes without divisiveness or exclusion.

Leeds Institute of Religion, Leeds Institute choir (1999-2001; 2004-2008)
Paddock Scout Group – as a warranted Beaver Scout Leader/ Assistant (2005-2006)
England Birmingham Mission (2002-2003)
Cambridge University (1996-1999)
Computer Lab / Cambridge Computer Lab Ring
Selwyn College
Selwyn College rowing club
Cambridge University Astronomical Society
Greenhead College, Huddersfield (1994-1996)
Huddersfield Technical College (1993-1995)
Huddersfield Astronomical Society (circa 1992)
Royds Hall High School, Huddersfield (1989-1994)
The Church of Jesus Christ of Latter Day Saints
Citizen of the United Kingdom.

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Link back to main menu
My brethren and sisters, if you can learn how to learn, you have acquired a habit that will not only give you such joy every day, but will also strengthen your character and lead you on daily to greater truths and more abundant life.
– Joseph Young, an older brother of Brigham Young, and member of the first Quorum of Seventy. {Find out more}
© 2004-2012 Matthew Slyman


Never mind bothering to answer my question about your assertion on Romney.

I’m not really interested in your opinions.

I think you owe a lot of people an apology though.


And, yes, they ARE real.

Posted by Gordon2352 | Report as abusive

@ matthewslyman —

To answer your question, no I haven’t read your article. Frankly, it isn’t worth my time to read anything you have written.


Have you read my article? If so, I am bemused that you could still accuse me of being a “Republican zealot” (I actually expected people reading THAT to accuse me of being a Democratic zealot). I’m just a curious person who likes to understand the reasons why things happen. Like you, I’m a firm believer in the principle of understanding history so as to build a better future… I think it’s vitally important for us to accept true principles and live by them, without prejudice to the source of those truths.


No, I do not think we are anything at all alike.

Are you still “bemused”?

Posted by Gordon2352 | Report as abusive

Whether Mr. “Slyman” apologizes for deliberately having mislead those of you who engaged in a conversation with him, the far more important lesson we all need to learn is to take NOTHING on faith, no matter who says it.

And that includes what I have said.

Think for yourself, and trust NO ONE!

Posted by Gordon2352 | Report as abusive

@Gordon2352: ALL OF THE ABOVE. Oops — I’ve been found out — I’d better delete my own website before anyone finds out I’m a “Mormon”! — I’m not exactly hiding this information, am I, by publishing it myself on a searchable website and by stating my real name, nationality and profession on this thread??? You must be a genius or something, to use THAT information to find MY WEBSITE with Google! Perhaps you’re getting excited over this point because the election is drawing close. Fortunately, you redeem yourself with some of your other remarks (a question worth answering — see below)…
FYI, the very blog article I cited (which you refuse to read) contains a DISCLOSURE section pointing out that I am a member of The Church of Jesus Christ of Latter-Day Saints. Plus, the regulars on should have spotted my regular DISCLOSURES here on relevant articles. What more do you want me to do: wear a big yellow Star of David with MORMON written on it, or something? Or would a big wooden cross be acceptable?

The only caveat for anyone searching for me on Google: if you hear anyone rapping for Jesus, I think that’s cool, but THAT’S NOT ME! There’s a Born Again Christian rap artist in North Carolina who is a namesake with me.

SLYMAN = MY REAL FAMILY NAME. I inherited the name and I am proud to bear this name as a tribute to my ancestors. My “Slyman” ancestors came from Ireland in the middle 1800’s; and the trail goes cold around the start of the 1800’s (anyone who can help me break through this barrier, please get in contact).

> “Setting aside the issue of taxes for the moment, I would be interested in knowing what you think those “spending cuts that America needs” are — exactly — and why.”
— A sensible question, which I am pleased to answer by referring you to better men who have trodden this ground before me:
Please start with David Cay Johnston’s and Gregg Easterbrook’s entire column archives on Opinion — I have a lot of respect for them, and regard them as journalists of the utmost integrity. For example, in specific answer to this question, try this for a starting point: ok/2011/09/08/why-federal-construction-s pending-doesn%E2%80%99t-translate-to-gdp -growth/

Beyond that, I don’t want this to descend into a shouting match so I’m out. You win.

Matthew Slyman

Posted by matthewslyman | Report as abusive

Isn’t it amazing how so many people have never studied history, and don’t know how much it cost to get us out of the last depression. If it were not for WW2 and the related war jobs and profits, the US would have starved to death.
After WW2, the deficit was over 180% of GNP which is no where near what is now.
Why are Republicans so uneducated and brainless, why?
Is it genetic?
Is there a cure for Romnesia?

Posted by americanguy | Report as abusive

Isn’t it amazing how so many people have never studied history, and don’t know how much it cost to get us out of the last depression. If it were not for WW2 and the related war jobs and profits, the US would have starved to death.
After WW2, the deficit was over 180% of GNP which is no where near what is now.
Why are Republicans so uneducated and brainless, why?
Is it genetic?
Is there a cure for Romnesia?

Posted by americanguy | Report as abusive

@americanguy: Perhaps the USA was only able to pay down its massive war debts so quickly because the USA was the only industrialized country that hadn’t been smashed to pieces by 1946 (so that US industrial production then overwhelmingly dominated a world economy with overwhelming demand).
QUESTION 1: WOULD IT BE SAFE to repeat this debt experiment in modern economic circumstances, with a globalized economy based on a diverse market of competing industrialized nations, where production capacity increasingly exceeds intrinsic demand, and where this trend is expected to continue into the future?
QUESTION 2: WOULD IT BE MORAL to get into debt now, to the same extent as our grandfathers did in WWII, merely to maintain our current oil-economy-based standards of living for a few more years, rather than to overcome an existential threat?
ANSWERS on a postcard…

Posted by matthewslyman | Report as abusive

Mad, utterly mad.

Posted by Biscayne | Report as abusive

2000-2008: two wars NOT funded by taxes or bond drives, but started at the same time new tex cuts are established (a bread and circus approach?); go-it-almost-alone in Iraq hurts U.S. business overseas on top of the war costs to the federal economy. Medicare part D may be the largest non-competitive government health program enacted, why no price competition or volume discounts like VA programs? Finally, 1/2 Trillion for TARP and the auto bailout. Then Pres. Bush (43) steps down.

2009-2011: stimulus about 1/2 Trillion including tax cuts; over this time Obama cuts deficits 1.7 Trillion to 1 Trillion in a steep downward trend. Continued tax cuts contribute to annual deficits, even so, they shrink each year under Obama.

Romney-Ryan-Norquist-Rand plan is to ignore son-of-Simpson/Bowles ‘sequester’ and spend $2 Trillion on defense (more of the same ships for new opponents’ high tech and low tech weapons to target, not research into new and better weapons and defenses — Lindbergh correctly advised the latter in the late 1930’s and early 1940’s), and give away Trillions more in tax cuts for millionaires and ending estate taxes on multi-million lottery-sized inheritances. It’s a Bain like move to cash out now, but we’re not talking about a struggling company we’re talking about our whole country.

Yes debt is bad, but it’s a lot less bad at zero percent financing, as Suzi Orman might say. Debt at such low interest is not the priority, and can take 2nd place after recovery and jobs stimulus. We need to grow the economy and reduce deficits in parallel, not repeat the 200-2008 policies by adding more tax breaks for Romney’s peer group while shortchanging government-funded research, education and infrastructure.

The GOP plan is cutting off long term investments with big payoffs to instead cash out for short term gain. That’s worse that slowly but surely tackling the deficit as Obama is doing during the recovery.

Posted by Decatur | Report as abusive

@Decatur: Interesting comment, although your figures don’t agree with those available from independent sources: displayafact.cfm?Docid=200
I’d also like to learn more about what you mean by “zero percent financing”. Not all of the federal government’s debts are based on paperwork being rolled over by the Federal Reserve at zero percent (I’m not entirely familiar with how this system works though, so I might have missed something). Some of the US federal debt is external debt (held by foreign central banks such as in China), and that certainly isn’t rolling over indefinitely at zero percent interest.


A lot of these discussions are missing another vital point: a mere DISCUSSION about the debts/deficits in which significant numbers of otherwise sensible Americans subscribe to the theory that debts/deficits don’t appear to matter (along the lines of, “let’s ignore the gas leak because we haven’t had an explosion yet”); can in itself damage investors confidence in the USA! This happens because they can get the impression American voters aren’t serious about electing public officials who will control & repay the deficits (the risk of debt default can substantially increase in these conditions). You’ve got to start taking this seriously, or else your interest rates might start getting hiked, and the debt amortization might start looking a LOT uglier VERY FAST as it has done in Europe…

Posted by matthewslyman | Report as abusive

Dr. for sale.

Posted by brotherkenny4 | Report as abusive

Paraphrasing Adam Smith, a public debt this large will never be repaid. It will either be inflated away or defaulted upon. The coercive Utopianism of jackboots will prevail. And all of the venal Solons responsible for the decades-long creation of this tyrannical mess will never be brought to justice, but will have buildings, highways, and dams constructed in their honor. RIP fidelity, rule of law, and the democratic process.

Posted by StevePhillips | Report as abusive

There is a big difference between saying that deficits do not matter (Cheney’s words under Reagan, NOT my words or my opinion) and arguing that forcing the economy to collapse (or undermining the opposition president?) by slashing public sector jobs in a recession is more important than helping stimulate a recovery (a tried-and-true method used by past Presidents who are now RINOs).

The revenue to fix the deficit will increase as the economy grows, unless we try the ‘starve the beast’ Norquist approach of cutting off the public side of a combined private and public economy where both aspects work in synergy, not in competition as the tea party would have us believe.

You seem to belong to the debt matters above all school, so – what were you saying about deficits under Reagan and Bush 43, adding debt for unfunded wars or arms race, then piling on structural, recurring deficits from high-bracket tax cuts as insult to injury?

The cost of borrowing IS a factor in debt. The GOP refusal to compromise in 2010 lost us AAA rating and has potential to make existing debt structure more expensive – at no gain whatsoever (our rates go up so we have more total debt/deficit, rather than adding debt by borrowing for more highways at same low rate as a stimulus that has some actual benefit). The risk now is failing to use all tools – the cuts we’ve made for 3 years now, plus sitmulus, plus tax revenue – just like Eisenhower used all those tools, but he’s now a RINO.

Debt reduction is needed in the long term (say 2-10 years, and that’s why decade long planning was under discussion with the last debt deal (cutting 3.4 Trillion) offered by Obama & democrats. In the short term of months to say 2 years, we need jobs stimulus and in the longer term we’re less competitive if we don’t invest in science education and infrastructure. A balance is needed, and what’s missing from the balance is raising the revenue side of the picture, which is the leg of the stool that Romney-Ryan want to cut even further.

The greatest uncertainty that jepardizes our credit is the ongoing GOP brinksmanship like 2010 loss of AAA. The tea party is willing to cost us billions or trillions more at the next fiscal cliff instead of making any compromise. I hope we don’t see what a Pyrrhic victory for them looks like for the rest of us.

The GOP plan is a starvation diet for the middle class US economy, with extra dessert for the ‘job creators’ who must be ready to create some jobs anytime now, after about 30 years of tax breaks with little to show in return.

The approach that works better than the tea party starvation diet, where the rich save us from dessert by taking it all, is diet and exercise for everyone. It’s working so far and the year to year deficits are shrinking as we recover from the crash of a generation. We are looking a lot better than the new GOP bogeyman of Europe that you bring up. Only Canada may be recovering better than the US.

Posted by Decatur | Report as abusive

One key point is that when Greece, Spain, Ireland, et el. go in the tank, the EU bails them out. When we do, no one can or will.

Posted by ErnieLane | Report as abusive