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http://www.boston.com/news/nation/washington/articles/2005/01/14/wars_hidden_cost_called_heavy/

Piece in the Globe about costs of replacing equipment (and retraining, etc.) from Iraq war, above and beyond ongoing budget needs for sustaining the war ($100 billion expected "supplemental request" for ongoing costs). Important for those of us concerned with interest rates to try to ascertain the real demand, now and in the next several years, for debt financing for the Federal budget. The Pentagon is using the funding crisis to try to deep six some big ticket weapons boondoggles, but these projects, most of which have seen previous attempts to scuttle, have powerful legislators, mostly Republicans Bush is relying on for support on other issues, living off the pork, so I have my doubts about how much will get cut.

I'll go out on a limb and predict (remember, my predictions are always wrong) that the deficit in the General Fund for the 2005 fiscal year will be greater than for 2004, because the economy will grow slower than projections and expenses higher.
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The only war cost worth considering, imho, is the cost in young lives snuffed out by the designs of our President and his lackeys, and the misery costs to their families. Roosevelt called 12/7/1941 the "day of infamy"; well, so was the day we attacked the weapons of mass destruction filled Iraq.
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I confess I don't really understand what is going on with bonds as the 10-yr Treasury just doesn't seem to rise significantly. It is still well below its long-term average rate (5.3%).

brucedoe
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I'll go out on a limb and predict (remember, my predictions are always wrong) that the deficit in the General Fund for the 2005 fiscal year will be greater than for 2004,

Wishing don't make it so.

Psst, the Deficit's Shrinking
Why won't anyone say it?
Here's one story you won't find on tomorrow's front pages: “The U.S. Budget Deficit Is Shrinking Rapidly.” The headline would be accurate, but the mainstream media is much more interested in talking down this booming economy than telling it like it is.


http://www.nationalreview.com/kudlow/kudlow.asp

ayduda

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Wonder what Kudlow is smoking? I'll believe the decreased deficit when I see it at the end of the year.

He mentions “would freeze most spending on agriculture, veterans and science, slash or eliminate dozens of federal programs, and force more costs, from Medicaid to housing, onto state and local governments.”

I'm not a veteran so I don't know what benefits veterans are losing though I hear that benefits are being lost (though I know of one retired colonel who is going to have his spine operation done privately because of complications to getting it done in military hospitals and yes, he has Tri Care for Life). At any rate, the proposal is to cut more benefits for veterans on top of whatever has been done. Well, just like Blacks vote for Democrats - no matter what, veterans tend to vote for Republicans - no matter what. I guess it is fine that veterans acquiesce in this, but somehow it doesn't seem right to me to stiff our veterans.

brucedoe
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Ah...Noooo, it isn't....if you count into the deficit number the SSI annual surplus of 101.1 Billion (last year) that the Congress spends each and every year.....in addition to what was reported as 440 Billion.

Psst, the Deficit's Shrinking
Why won't anyone say it?
Here's one story you won't find on tomorrow's front pages: “The U.S. Budget Deficit Is Shrinking Rapidly.” The headline would be accurate, but the mainstream media is much more interested in talking down this booming economy than telling it like it is.

http://www.nationalreview.com/kudlow/kudlow.asp

ayduda


Then of course we can add in the additional "debt service costs" as the ST rate climbs; 2.25% Ffunds currently, likely capping to 3.0% (SWAG) by 2005 YE.

Hang onto your wishes hopes & prayers......a declining Deficit ain't gonna happen, at least not in my lifetime, or we believe in the Easter Bunny & the Toothfairy....

KBM (age 61 & counting to 66 - with a T-Bond portfolio for the last 34 years and the experience to go with it)

PS: Not to be offensive about it - (But anybody that "listens to L Kudlow", deserves exactly what will happen to them)

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PS: Not to be offensive about it - (But anybody that "listens to L Kudlow", deserves exactly what will happen to them)

As they say in less polite circles, how about RTFA (read the f***ing article)? Kudlow shows how the economic expansion from the President's tax cuts are increasing tax revenue and decreasing the deficit. Any comments on that?

ayduda

with T-bond portfolio along with other diverified investment for the last 35 years and pretty good experience with it
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It appears to me that Mr. Kudlow is ignoring all of the "off the books" Republican expenditures.

PF
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There's a recent quote from a White House "staffer" that has become a rallying cry for us stuck-in-the-mud empiricists, which is essentially a paraphrase of Marx's famous: "Philosophers have only interpreted the world.... The point is to change it." Before they came to power, the neo-cons weren't reticent about their view that Intelligence should serve the interests of Policy, rather than policy being framed by intelligence (i.e., facts). This is exactly what came to pass with Iraq, where the neo-cons used 9-11 as an excuse for going after Saddam (which Pappy Bush, Powell, and the other "realists" had denied them in the first Gulf War), freely cooking the evidence for Saddam as a clear and present danger and suppressing the intelligence that suggested the war would be deadly, costly, and difficult. The guru of the neo-cons at the University of Chicago (I'm blanking on his name) openly advocated a right-wing version of Bolshevism—since we are smarter than anyone else and know what is best, and since the timid masses are unlikely to follow our superior path if we tell them our plans, we have a right and duty to lie to get our way, and once we achieve our goal, they will thank us.

The right wing economic agenda—eliminating progressive taxation, destroying social security, leaving consumer and environmental protection up to "market forces," dismissing the economic safety-net, doing away with public education (university and grade school)—is not going to get much political support if debated openly. So, cooking the books is in order. This is why we get the continuous claim that cutting taxes for the rich leads to increased economic growth to the point that it generates more money for the government than before the tax cuts, with the lie that this actually happenned under Reagonomics—the "squeeze the beast" ideologues know better, and are simply trying to force cuts in domestic spending by creating an unmanagable deficit, without having to win a debate over tax cuts for the rich versus domestic spending as priorities. The complete fraud trying to panic the country out of Social Security by claiming it is in imminent danger of bankruptcy, instead simply needing some actuarial adjustment to sustain it indefinitely, is another example.

Cooking the books on the budget is also a means of achieving ideological goals in the face of "empirical reality." If you keep expenditures, such as Iraq (or borrowing somewhere around $10 trillion over the next 40 years to pay Social Security recipients, while waiting for private accounts to kick in their supposed advantage), off the books, and if you treat loans from Social Security as revenues, you don't have to confront the real deficit, which can only be dealt with by raising taxes or huge cuts in Medicaid (which in reality means huge cuts for indigent elderly and the working poor) and defense—nickle and diming environmental protection, student loans, Science, etc., all of which have strong public support (Science funding is essential to the business community) is only a drop in the bucket. Of course, it's easy to cut the deficit if you start from an inflated, imaginary figure of what the deficit might have been in a worst case scenario, instead of working from actual annual figures, using uncreative accounting.

I'm predicting the real, uncreative accounting, deficit in the General Fund for 2005 will be higher than for 2004. We'll find out (if we can sort through the creative accounting), at the end of the fiscal year, whether I am right or wrong. I'm basing my prediction on: 1) higher cost for Iraq, partly because some money that would have gone into 2004 expenditures got delayed to keep them from becoming an election issue; 2) lower than expected economic growth, since I see no way the housing boom and other consumer spending derived from borrowing can continue apace; 3) increased subsidizing of the general fund from the growing Social Security surplus, which gets treated as revenue in official budget statements; 4) an expectation that budget cuts being pushed by the White House will not come to pass, at least to the extent being asked, because the big military projects, some almost universally accepted as pork, have powerful supporters in Congress, and the domestic cuts would have an impact on ordinary citizens that could make life a lot more difficult for politicians than if they really could have their cake and eat it too, by tax cuts lifting revenues.

I will also happily predict that smoke-and-mirrors accounting will show a lower deficit.
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Kudlow shows how the economic expansion from the President's tax cuts are increasing tax revenue and decreasing the deficit. Any comments on that?

Behind the smokescreen, cutting taxes will result in higher debt. Yes, rising debt fuels the economy (more abroad than domestically), up to a point. Oh, let's not even talk about financial implications of Iraq (and perhaps Iran).

However, the efficiency ratio is sinking inexorably. Last figure I read a few days ago is that you now need $7 in debt increase to raise GDP by a single dollar.

The end is quite predictable: even if (mostly strategically/ politically motivated) "creditors" keep buying US debt, at some point the US and its citizens will be entirely burned out, and without a manufacturing base. Only an unservicable debt mountain will remain, to be reneged or inflated away...

SB
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I will also happily predict that smoke-and-mirrors accounting will show a lower deficit.

Oh... I get it. If the deficit is lower, it's 'smoke and mirrors', if it's higher, then it's God's truth. Thanks for enlightening me.

ayduda
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