perfidy

AP is reporting that in the third quarter, economic growth has jumped up to a 7.2% annual rate, more than double the not particularly anemic 3.3% growth rate of the previous quarter. This is the strongest single quarter gain since 1984.

The economy's recovery from the 2001 recession has resembled the side of a jagged cliff; a quarter of strength often has been followed by a quarter of weakness. But analysts are saying that pattern could be broken, considering increasing signs the economy finally has shaken its lethargy and is perking up.

Near rock-bottom short-term interest rates, along with President Bush's third round of tax cuts, have helped the economy shift into a higher gear during the summer, economists say. The next challenge is making sure the rebound is self-sustaining.

Job creation surged to a net increase of 57,000 in September, the first increase in eight months - though job creation is generally a lagging indicator of recovery. The article goes on to list improvements in other economic indicators - drops in unemployment claims, increases in wages and benefits, consumer spending, and business capital spending.

As for the government's role:

Federal government spending, which grew at a 1.4 percent rate, was only a minor contributor to GDP in the third quarter. Spending on national defense was flat. But in the second quarter, military spending on the Iraq war - which grew at a whopping 45.8 percent rate - helped to catapult economic growth.

The evidence suggests that businesses are still somewhat gunshy, and unwilling to trust in the economy's rebound just yet. But if, as economists predict, that the next quarter will show at least 4% growth, I think that we've turned the corner on the most recent cyclical recession.

Of course, one result of a growing economy will be the reduction in deficits as government tax revenue increases. If the typical pattern holds, we will enter a period of economic growth that will last another decade before the next recession. If this growth period is even half as potent as the last one, we should see deficits disappearing again so long as the increases in federal spending stays not to far ahead of inflation.

Of course, it would be better to see a reduction in federal spending. I have played with the budget simulator that Ross linked recently, too - and balancing the budget is simple. As long as you have your priorities straight. I balanced the budget by increasing defense spending and simply halting increases in social spending, while eliminating the department of education and farm subsidies.

And, in answer to one of Ross' claims in the previous post, what are you smoking? Defense spending, including the Iraq War and Veteran's Benefits, is $547.61 billion. Spending for social welfare (Education, Health, Medicare, Social Welfare, and Social Security) is $1.27 trillion. That's almost one and a half times more for welfare boondoggles, not an order of magnitude less.
Huge jails house people who commit crimes. Blacks are in prison because they commit more crimes - generally against other blacks. This is a sad situation, but you can make the argument that social policies dating back to the sixties are partly responsible. When you reduce everyone's taxes by, say 5%, of course the people who pay more taxes will get more money back in absolute terms. But that isn't what happened. After the tax cuts, the wealthiest among us are paying a larger fraction of the total tax collected than before. And it is semantically incorrect to refer to the government as spending money on a tax cut. People earned that money, the government takes it. If the government takes less, it is not spending money.

I agree with Ross that Agriculture subsidies are a travesty, and should go. Likewise with other subsidies. As far as the tax cut, Ross can feel free to give more money to the government, but I'd like to keep mine.

My general view on government spending is that as long as we have entitlement programs that consume vast portions of the federal budget, worrying about nickel-ante programs that cost only millions of dollars is pointless. I really have a hard time getting exercised over the (on the government scale) small expenditures on things like the NEA, NPR, and so on. If the liberals need NPR to get the word out, fine. They can have their All Things Considered and Lake Wobegon Days.

The most important things to spend money on, to me, are those things required by the constitution. Defense, Treasury, Justice and the Courts, the State Department. Once those are adequately funded, we can use leftover funds to do nice things like unemployment insurance, welfare, medicaid, scientific research and the like. (Though they should be reformed, and their budgets should never, ever be indexed to the inflation rate. Each budget should be approved by the Congress, not have built in automatic increases.) With the change the government finds under the couch, it can fund the smaller programs.

A friend of mine once had the idea that we should include a form on the Tax return that lists, to a reasonable amount of detail, the various departments and budget items in the gov't. You can then allocate your tax dollars to them however you like. Items that get no money from the taxpayers are eliminated. The gov't would be allowed discretionary control over tax revenue from businesses and excises, etc. It would be interesting to see what happens.

I've talked about this before, but progressive taxation is an offense to fairness. We are supposed to receive equal protection of the laws, it's in the constitution. Tax brackets are discrimination. There is no reason why if I earn $5000 more in a year, I am affected by a different set of standards than I am now. Everyone should have the same, exactly the same rules to live by.