Exit Stage Left

Neal Page: "He says we're going the wrong way."
Del Griffith: "Oh, he's drunk. How would he know where we're going?"
--Planes, Trains & Automobiles

A 40+ yr comparison of US federal government spending vs revenues is shown below.

Modern day tendency for government to spend more than it takes in (a.k.a. a budget deficit) began in the 1970s and picked up speed in the 1980s under President Reagan. The gap narrowed and actually turned positive (a.k.a. a budget surplus) in the late 1990s under President Clinton. The graphic portrayal of the recent widening of the deficit indicates how extreme the intervention has been.

Let's note a few things.

-->Deficit spending is a bi partisan phenomenon.

-->The budget surplus in the late 1990s was a bubble driven anomoly. Jack stock prices higher and collect a windfall in capital gains taxes. Note that once the tech bubble burst, tax receipts collapsed and the deficit widened as behavior reverted to the long term trend. A similar pattern is evident during the 2005-07 housing price run-up, altho a surplus was never achieved before this bubble popped and we went back the other way. Can you see why Keynes worshipper Paul Krugman is on the record as saying that we need to blow another bubble?

-->Can you see the folly in President Obama's plan to freeze a fraction of the budget after an unprecedented run-up in spending?

-->The widening chasm between spending and income can only be reversed by spending less and saving more. We are currently doing the opposite.