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They are in the business of watching our money, yet they wait until interest rates start to rise (or at least threaten to) to refinance our debt into lower interest vehicles. We had a surplus in the late 1990’s that siphoned off too much investment capital from the economy and helped trigger the slowdown when the Fed dried up the money supply. The economy was already starting to slow from the high drain those tax surpluses took from the economy, and when the Fed let the water out of the pool, the economy hit bottom.
Many feel those surpluses were some security blanket. They were, but only for Congress because they gave Congress a big piggy back to break open and spend, spend spend. What those surpluses mean is that we were taxed too much. We were told in 1994 that we had to raise taxes to pay for Congress’ spendthrift ways. It was not put that way, but that is what it was all about. No one, and I mean no one, was expected the boom from the 1980’s to reignite the way it did after the 1991 recession slowed it down.
Indeed, the economy was already in recovery mode well before these tax hikes, and the tax revenues would have mushroomed anyway. Indeed they would have been even stronger because the higher taxes bled money from the economy that would have been invested in the economy not in Congress’ pork. What Congress should have done when those surpluses came in is say we made a mistake and raised taxes too much; here is your money back. Instead they acted as if it was theirs in the first place, and indeed they still do, bemoaning the lost surplus. The ONLY thing that the lost surplus did is prevent Congress from spending like a drunken sailor even more. Instead that money was turned back and put into the economy via tax cuts. Without that fiscal stimulus to jumpstart the economy, the debt would be even worse today: the surplus would have evaporated just as quickly as tax revenues plunged even more than they did. Now revenues are up 10% and growing; that beats the hell out of a continued recession. You know as well as we do that there was NO investment ongoing in the US economy until the tax cuts were passed that gave incentives to invest where none existed before.
The point is that there is moaning about how the reissue of the 30 year bond is an admission that the deficit is here to stay. So what? Is it better to not admit we have a deficit and issue higher yield bonds that cost more to retire? NO! Deal with reality. It is a good move even if it is almost two years late. Why not consider 50 year bonds as well? Again, let’s face reality. Corporations used to issue 100 year bonds. This is not new ground and it can save us all money.
Many feel those surpluses were some security blanket. They were, but only for Congress because they gave Congress a big piggy back to break open and spend, spend spend. What those surpluses mean is that we were taxed too much. We were told in 1994 that we had to raise taxes to pay for Congress’ spendthrift ways. It was not put that way, but that is what it was all about. No one, and I mean no one, was expected the boom from the 1980’s to reignite the way it did after the 1991 recession slowed it down.
Indeed, the economy was already in recovery mode well before these tax hikes, and the tax revenues would have mushroomed anyway. Indeed they would have been even stronger because the higher taxes bled money from the economy that would have been invested in the economy not in Congress’ pork. What Congress should have done when those surpluses came in is say we made a mistake and raised taxes too much; here is your money back. Instead they acted as if it was theirs in the first place, and indeed they still do, bemoaning the lost surplus. The ONLY thing that the lost surplus did is prevent Congress from spending like a drunken sailor even more. Instead that money was turned back and put into the economy via tax cuts. Without that fiscal stimulus to jumpstart the economy, the debt would be even worse today: the surplus would have evaporated just as quickly as tax revenues plunged even more than they did. Now revenues are up 10% and growing; that beats the hell out of a continued recession. You know as well as we do that there was NO investment ongoing in the US economy until the tax cuts were passed that gave incentives to invest where none existed before.
The point is that there is moaning about how the reissue of the 30 year bond is an admission that the deficit is here to stay. So what? Is it better to not admit we have a deficit and issue higher yield bonds that cost more to retire? NO! Deal with reality. It is a good move even if it is almost two years late. Why not consider 50 year bonds as well? Again, let’s face reality. Corporations used to issue 100 year bonds. This is not new ground and it can save us all money.