Thursday, December 22, 2005

John Snow's Bubble-Budget Hypocricy

Bush's Treasury Secretary John Snow recently came with the most ludicruos statement since Bush's own claim of having imposed "spending restraints" , namely that "the president's legacy will be one of having significantly reduced the deficit in his time" .

Say what???? "Significantly reduced the deficit"? Bush inherited a surplus from Clinton which have enabled him and his supporters gloss over the full extent of Bush's fiscal recklessness.

Snow being prepared to the objection that Bush inherited a large surplus from Clinton argues that the surplus was "a mirage" and "wasn't a real surplus". The argument was that the surplus was the result of the tech stock bubble. But while Snow actually does have a point on this issue, as the Clinton surplus was largely a result of windfall capital gains tax revenues from the tech stock bubble as well as the temporary economic boom associated, he is highly hypocritical.

The temporary decline in the budget deficit in fiscal year 2005 was a result of the housing bubble as well as a unsustainable rate of asset price inflation in other areas too something which in turn have contributed to a temporary capital gains tax revenue windfall as well as having created a unsustainable cyclical boom. If you are going to [rightly so, at least partially] dismiss the Clinton surplus as a result of a bubble, then you must also adjust the current budget deficit to a far higher level as it would have been far higher without the current housing bubble.


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