Quote:
Originally posted by Captain
I do not believe I made these assumptions. I am simply trying to test your hypothesis, and making an initial stab at it based on very broad data. If you'd like your hypothesis to hold up, I'd suggest digging deeper into the data.
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I have not been around bond traders in a while (by the way the real trendsetters are not the guys in the pit). But I was in this world from 92-96. These guys predict future budget deficits for a living and their income depends on such predictions. So they can't afford to get involved in partisan B.S. That is why I think their opinion is a good one.
I know what the conventional wisdom was at the time. After the 93 act, it looked as though the only way Clinton was going to balance the budget was to keep raising taxes. His tax increase did not solve the problem and spending had actually gone up. So if spending was going to continue to go up, Clinton was going to have to keep raising taxes to get where he wanted to go. The Bond markets did not like that scenario.
Before the Republicans came in, and when he was working with the Dems Clinton was the voice for Fiscal restraint. However, Congress would not accept most of Clintons proposed cuts and just accepted his proposed tax increase. But when the Republicans came to town, and the Republican proposals came through, Clinton thought that the Republican cuts were too deep (they were not actually cuts, but reductions in growth). There are strong arguments for what Clinton did. The cuts may have been too deep. However, there is no question that he put these domestic programs over fiscal discipline. You can argue if this was the right move, but there is no question that is what he did.
Clinton fought budget cuts from 94 until the end of his presidency. So to give him credit for balancing the budget is just absurd. It is like giving him credit for welfare reform.
If the Republicans had not come in 94, the only way out of the mess was to keep raising taxes every year and I just don't think there was the political will to do it. And the Dems were not going to make the necessary cuts.
In the partisan political game the President is given credit or demerits for everything that happens during their tenure. But the more discerning citizen realize this is just partisan B.S. Especially when the President's party does not control congress.
However, since Bush came to office, and he has shown amazing control of Congress, I think it is fair to give Bush credit or demerits for everything that has happened since he has been president. For the first time since Lyndon Johnson, the presidents budgets have actually become reality.
As for why the long term bond rates are still low is a mystery to me. I am not in that world anymore. I would think they would be higher. My suspicion is that the markets thought the deficits were necessary to create growth and that growth would lead us back to balanced budgets. But with Delay's talk of already cutting all the fat I, I would be really sckeptical if I were a bond trader. But maybe they know something I don't.
