U.S. to run first budget SURPLUS since 2008: CBO

[Quackers]

Growth...

The US has fairly successfully grown its way out of its budget deficit. Its deficit has shrunk by considerably more than the UK's, even though the US didn't do anywhere near as much to cut spending or raise taxes as the UK. The difference is that the US's GDP has far surpassed where it was before the recession, whereas the UK's GDP is still far below where it was before the recession.

Hopefully leaders in Europe will realise this. And hopefully by the time they do it won't be too late.

Can you expand on this?

 

[kramerfan86]

In April the government spent $X
In April the government received $Y in revenue.

Y > X => 30-day surplus.

Just like how it works with a calendar year.

April is, not surprisingly, typically a good month for the government coffers.

I guess I should have been more specific. I obviously know that, but it just seems like a stupid concept to me since the government near exclusively establishes yearly budgets to split up deficits and surpluses in individual months.

 

[Mise]

Can you expand on this?

Well, we (in Europe, inc. the UK) are doing the exact opposite. We're shrinking our deficit by cutting spending and raising taxes, which is choking off whatever pitiful recovery we had. Growth has stalled and GDP is falling. This, in turn, is making it harder to raise sufficient tax revenues in order to further shrink the deficit. The BIG worry is that this becomes a vicious circle: we cut spending and raise taxes to reduce the deficit, but GDP falls faster than the deficit, meaning the deficit ends up getting bigger as a % of GDP. This almost certainly won't happen in the UK, but some countries in the Eurozone are close to the edge. The more pertinent worry for the UK is that we end up permanently destroying capacity in the economy by discouraging investment. I.e. GDP is forecast to fall in the short term, so businesses stop investing, so GDP falls in the long term. A temporary recession could end up permanently cutting a big chunk out of our GDP. Personally I think that this has already started to happen in the UK; we've already discouraged investment to such an extent that we may never get back to trend in the way we did after all other recent recessions.

 

[Quackers]

I was aware of British policy response and the problem of withdrawing a chunk of G.
I'm asking whether Britain at the time when they made these decisons with the current knowledge availiable, made the right ones? Was there any manuverability for a minor stimulus? Because I don't remember that being an option at the time - and your saying we could or should have?

 

[Mise]

We spent money on fiscal stimulus in 2008, which got us out of the recession at the time (we cut taxes and brought forward various investments that were in the pipeline). After that, no, we never really had the option for further fiscal stimulus - the recession was over, so the right thing to do was to look at reducing the deficit. It was the pace and scale of the cuts that we had a choice over. We didn't have to cut as quickly as we did, and we're paying the price now in terms of lower GDP growth.

It's important to note that George Osborne took a genuine gamble. He reckoned that reducing the deficit faster would result in lower interest rates and higher business confidence, both of which resulting in more business investment. It seemed like a plausible argument at the time, but it was still a gamble; mainstream economic theory didn't really support this kind of "expansionary fiscal contraction". At the time I was fairly open-minded about it, tbh I really hope that it worked for the Lib Dem's sake. Turns out it didn't - we got the ultra-low interest rates, but we don't have the confidence to invest. Part of that is the Eurozone's fault, but I can't help thinking that if we had the kind of dysfunctional government that the US has (i.e. one that didn't have the power to cut spending, raise taxes, or do anything much at all), we wouldn't be bouncing along the bottom right now.

 

[Lefty Scaevola]

Yeah a one month surplus, because that month, April, is when tax returns and tax payments (quarterly and annual) are due. 11 months of deficits,. Also Take note that this administration had deficits in it first 3 Aprils, as well as all other months, something rather unprecedented in my lifetime. For all others Admins I can recall, The Federal Government would usually have monthly surpluses in January, April, June, and September, when Quarterly Estimated payments were due.

 

[JollyRoger]

Did you check back all three thousand years?

 

[Lefty Scaevola]

Nope, I have only been paying USA taxes for around 40 years. I paid little attention to them before then.

 

[Smellincoffee]

That's one mighty presumption . Today I elected to pay $4.50 to use the expressway instead of take the log jammed , pot holed alternate route( which my taxes also contributed to) . It didn't feel too consensual . I certainly didn't get that "next year I'll vote for the other guy and I won't take one in the rear while driving to work" feeling

Well, your bad for supporting a financially unproductive mode of transport. There are too many people in too many cars for the roads to be stress-free.

Depending on your age, though, it may not be your fault. We can thank the generations of the 50s and 70s for our domination of the cars.

 

[rugbyLEAGUEfan]

Well, your bad for supporting a financially unproductive mode of transport.

Surely you need to know my alternatives and to a degree , preferences , before making such a claim ?