The “Deficit Problem” Isn’t Financial: It’s Political
The federal budget deficit and its cumulative cousin, the national debt, are much more political and media phenomena than they are financial. Which isn’t to say that they don’t exist. Obviously, they do. But they have been invested with apocalyptic significance mainly for political purposes: to scare people and to coerce them into reducing the size and the scope of government.
The truth is that massive deficits are almost exclusively a Republican creation. But Republicans were conspicuously silent in the decades of their big run-up, when the deficits were providing the hollow illusion of easy prosperity. The other truth is that it is only deficits that can get the economy out of the ditch that Republicans left it in when Bush slunk out of office.
But as Republican Senate leader Mitch McConnell has said, “Our first priority is to make sure Obama is a one-term president.” That is the real reason Republicans are born-again fiscal fundamentalists: deficits are the only thing that might actually turn the economy around and that is exactly what the Republicans are so intent on avoiding.
The first tip-off about the fake hysteria surrounding the deficits is that all the Chicken Littles crying the end of the world were silent when the real run-up was being conducted. Look at the history.
Ronald Reagan inherited a national debt of $1 trillion. He cut taxes on the rich and exploded government spending so that in just twelve years, by the end of the Bush I administration, the debt had quadrupled to $4 trillion.
Where were the Nervous Nellies back then? And Republicans have apotheosized Reagan into some kind of secular saint, a totally schizophrenic adulation if we are to believe their current hair-on-fire shtick about the toxicity of debt.
Bill Clinton reversed Reagan’s supply side economics. He raised taxes on the wealthy and cut government spending to the lowest percent of GDP in 40 years. As a result, he paid down the deficit every year he was in office, even delivering a budgetary surplus in each of his last three years. He handed a $136 billion surplus to George W. Bush in 2001.
If Republicans were truly sincere about their putative religious aversion to deficits, they would idolize Clinton, who paid them down, and demonize Reagan who ran them up. It says everything about their honesty that they do exactly the opposite.
Bush II, of course, returned to the same voodoo economics that Reagan and his father had embraced. He aggressively cut taxes on the rich (his “base” as he called them) and exploded government spending. He ran deficits every single year of his presidency, doubling the national debt in only eight years.
Again, where were the Heraldic voices of doom when their country really needed them? They were nowhere to be found. In fact, Bush’s vice president, Dick Cheney, brushed off Treasury secretary Paul O’Neil’s concerns about the hemorrhage with his famous dictum, “Deficits don’t matter. Reagan proved that.” Remember?
So, the choice to get all apoplectic about government borrowing is exactly that — a choice, and a political one at that. It is a choice Republicans conveniently never invoke when the deficits are their own, as they almost always are. Again, look at the history.
A Republican has occupied the White House for 28 of the last 42 years and never once in all of those years did any one of them ever produce a single balanced budget. Not once. They are financial phonies. Fiscal frauds.
And how ironic is it that these same Cassandras who are prophesying the end of the world are just as adamant that Bush’s tax cuts for the very rich must be preserved at all costs. Over the next ten years, those tax cuts will cost the government $700 billion in lost revenues, a seven hundred billion dollar, dollar-for-dollar increase in the deficit.
So, they can’t have it both ways. If the deficits do, in fact, pose an existential threat to the republic, then the government had better bring in more revenues from whatever source it can. But it looks like the deficits aren’t quite so onerous that we should bring in revenues from the only source that could actually pay them, the very rich. Funny thing, huh?
It is this duplicity on both history and policy that so clearly betrays Republican hypocrisy. They’re not interested in reducing deficits. They’re interested in reducing the size, the scope, and the efficacy of government, for government is the only agent left in the country with the capacity to stand up to the big corporations, to stop their sociopathic looting of the economy and their suicidal predations on the environment.
Republicans are also determined to undermine, even destroy, anyone who stands in the way of their agenda. Scott Walker, governor of Wisconsin, is the archetypal poster-child for this role.
Wisconsin’s legislative fiscal analyst had reported that the state had a $120 million surplus before the governor gave $140 million in tax breaks to corporations. So now, being shocked — SHOCKED — to discover a deficit, Walker claims he needs to dismantle public sector unions.
It’s like that iconic parable describing chutzpah: the child who kills his parents and then throws himself on the mercy of the court because he’s an orphan. But wait! It actually gets worse. The unions responded with substantial give-backs to help control the state government’s costs. Walker’s response? He’s not interested.
You see, the deficit is not, in fact, the problem. It’s just the fiscal train wreck that Republicans, from Wisconsin to Washington, have engineered to justify dismantling the social safety net and breaking the resistance of those people who will not submit themselves to living as serfs.
Finally, beyond the sham of their real history, beyond two-faced policies, there is the simple, conveniently overlooked matter of economics itself.
Ninety percent of the Obama deficits can be traced directly to actions of the Bush administration that carry over to the present. These include two sets of tax cuts for the rich, two seemingly unending wars, a $600 billion give-away to the pharmaceutical industry, and The Greatest Economic Collapse Since the Great Depression. That is what Obama inherited from Bush, together with a $1.3 trillion deficit. Again, look at the data.
Bush’s Great Recession started in December 2007, 13 months before Obama took office. In January 2009 when Obama was sworn in, the economy was losing 780,000 jobs a month. A month later, in February 2009, he pushed through a $787 billion stimulus package. Job losses bottomed out two months later, in April, and by November the economy was not only not losing jobs any more, it was creating them.
Did the turn-around require deficits? Of course it did! The economy had imploded and Bush was only too happy to toss the turd to his successor. And where else was the impetus going to come from to actually re-start demand? The alternative would have been an accelerating death spiral into complete economic collapse. We did that once under the tutelage of Republican economics. It was called The Great Depression.
Now, to be sure, the current recovery is fragile. Eight million jobs were lost in the Bush Recession. They haven’t been replaced. Eight trillion dollars of home equity was destroyed and it may not be replaced for decades. Fifty million people are living in poverty. Consumer spending makes up some 70% of the economy. So, as long as consumers are so battered, spending is going to be weak.
And businesses are certainly not taking up the slack. Though their balance sheets are glutted with some $2 trillion made from shifting jobs to China, investment in the U.S. economy as a percent of GDP is at 12%, the lowest it’s been in the last 40 years.
Are Obama’s policies beyond reproach? Not by a long shot. He should have pushed for a much larger stimulus package and not caved to Republican demands to extend the Bush tax cuts. He shouldn’t have gone along with Bush’s larcenous give-aways to the banks and should have done much more to constrain the soaring costs of health care which are the real source of the economy’s debt problems.
But right now it is federal government spending that is keeping the economy afloat, the more so as states and cities, which cannot run deficits, are cutting their spending. In fact, the surest way to sink the economy would be to pull the plug on federal government spending. Which says more about the real motives of the latter-day deficit hawks than all of their insufferably strident sanctimony combined.
Yes, in the long run, the debts will have to be repaid. But the best way to assure that that can happen is to get the economy moving again, to get people working and paying taxes, just like Roosevelt did the last time Republicans drove it over a cliff. But rebuilding is going to require some deficit spending, at least in the short run.
Republicans don’t abhor deficits. They love them. That is the real “money-where-your-mouth-is” truth that all of their pious posturing cannot disguise. Their own history couldn’t be more persuasive on that point. What they abhor is deficit spending that will help the economy on a Democrat’s watch. Their aversion to deficits isn’t economic, it’s political. And their motives aren’t exemplary. They’re despicable.
By: Robert Freeman, CommonDreams.org, originally posted February 27, 2011
Deficit Hawks and The Games They Play
For 30 years, conservative ideologues have played moderate deficit hawks for suckers.
You’d think this might endow those middle-of-the-road deficit-busters with a touch of humility. Fat chance. They stick with their self-righteous moralism, pretending to be bipartisan and beyond ideology. In fact, they make the problem they want to solve worse by continuing to empower the tax-cuts-in-every-season conservatives.
It’s thus satisfying to see President Obama ignore the willfully naive who are wailing over deficits. He knows that new revenue will have to play a big role in deficit reduction. He also knows that House Republicans are pretending we can cut our way out of this mess and would demagogue any general tax increases.
So he has proposed some serious spending cuts and some modest revenue increases to keep things stable as he embarks on a long struggle to move our dysfunctional budget politics to a better place. This annoys his deficit-obsessed critics, by which I mean just about everyone who says he should simply embrace the proposals of the Bowles-Simpson commission. Obama should smile, let them rage and go about his business.
Let’s look at history. When Ronald Reagan took office in 1981, he won big tax cuts coupled with big increases in military spending. The tax cuts and a severe recession tanked government revenue.
Unlike today’s conservatives, Reagan at least acknowledged mathematical reality and signed some tax increases. But these were insufficient, and it fell first to George H.W. Bush – the last truly fiscally responsible Republican – and then to Bill Clinton to restore budgetary sanity.
But the conservatives who dug the hole did nothing to get us out of it. On the contrary, they denounced the first President Bush for raising taxes, and every Republican voted against Clinton’s economic plan. For their bravery in supporting tax increases in 1993, Democrats lost control of Congress in 1994.
By the end of the Clinton years, we had a handsome surplus. In came the second President Bush who, with Republicans in Congress, declared the surplus too big. It was one problem they worked very hard to solve. Two tax cuts and two wars later, we were plunged into deficits – again. And the economic downturn that started on Bush 43’s watch made everything worse, cutting revenue and requiring more deficit spending to get the economy moving.
Where were the moderate deficit hawks in all this? They have a very bad habit. When conservatives blow up our fiscal position with their tax cuts, the deficit hawks are silent – or, at best, mumble a few words of mild reproach to have something on the record – and let the budget wreckage happen. Quite a few in their ranks (yes, including some Democrats) actually supported the Bush tax cuts.
But when it’s the progressives’ turn in power, the deficit hawks become ferocious. They denounce liberals if they do not move immediately to address the shortfall left by conservatives. Thus, conservatives get to govern as they wish. Liberals are labeled as irresponsible unless they abandon their own agenda and devote their every moment in power to cutting the deficit.
It’s a game for chumps. The conservatives play it brilliantly. By winning their tax cuts and slashing government revenue, they constrain what liberals can do whenever they get back into power.
How do we know our difficulties stem primarily from a shortage of revenue? Consider what would happen if we allowed all the tax cuts scheduled to expire in 2012, including the ones enacted under Bush, to go away. That would produce nearly as much deficit reduction over the next decade – roughly $4 trillion – as all the maneuvers of the Bowles-Simpson commission put together. If you want to be serious about closing the deficit, ending the Bush tax cuts is a good place to start.
The commission’s work showed just how effective conservatives have been. By saying they will never, ever, ever raise taxes, conservatives intimidate moderates into making concession after concession.
In the end, the Senate conservatives on the commission – but not the House conservatives – supported some mild tax increases. But Bowles-Simpson proposed about twice as much in spending cuts as in revenue increases. You would think that moderates could at least hold out for a 50-50 split. But no, they’ll do anything to win over a few conservatives.
As a result, any conservative who supports even the smallest tax increase is hailed as courageous. Any liberal who proposes moderate spending cuts is condemned as a gutless coward unless he or she also supports slashing Social Security and Medicare. What’s “moderate” or “balanced” about this?
I hope Obama has the spine to keep calling the bluff of the deficit hawks until they get serious about changing the politics of deficit reduction. We can’t afford another 30 years of fiscal evasion.
By: E. J. Dionne, Jr-Op-Ed Columnist, The Washington Post, originally posted February 17, 2011
The Tea Party’s Religious Inspiration
If American politics were a TV show, it would by now have jumped the shark. Then again, American politics is a sort of TV show, considering its surreal plot lines, its cast of kooky narcissists, and an epistemology that blithely combines absolutist religious convictions with post-modern relativism: belief that the Bible is literally true comfortably co-exists with disbelief in simple, verifiable matters of fact, like the President’s place of birth or the absence of an HCR death panel mandate. It’s not surprising that, under the influence of the Tea Party, freedom is just another word for no abortion rights (and no contraception or cancer screenings for poor women).
Not long ago, the Tea (taxed enough already) Party was often presumed to stand for what its name implies — low taxes and limited government services (or at least limits on programs and services not enjoyed by its members.) But a new Pew Forum survey offers some quantitative evidence that Tea Party members tend to be religiously inspired, social conservatives; the movement “draws disproportionate support from the ranks of white evangelical Protestants … most people who agree with the religious right also support the Tea Party.”
Pew’s findings are unsurprising. You might have inferred the Tea Party’s religious motivations from the statements and policies of its established or aspiring political leaders, at state and federal levels. I’ll refrain from offering an extended litany of their wacky assertions and legislative ideas. Just keep in mind a few examples.
One of the subtler but also most hysterical expressions of legislative sectarianism is the wave of state proposals aimed at banning the non-existent threat of Sharia law. At first glance, you might mistake this trend for an effort to keep religion out of government, but a law intended to impose special disadvantages on one religion is no less sectarian (and violative of the First Amendment) than a law intended to extend special advantages to another.
So it’s not surprising to find proposed bans on Sharia law in conservative states, like South Dakota and Texas, alongside extreme anti-abortion proposals. (You can find atheists and agnostics who oppose abortion rights, but generally the anti-abortion movement is overwhelmingly religious and tends to divide along sectarian lines: according to Pew, “most religious traditions in the U.S. come down firmly on one side or the other.”) The notorious South Dakota bill that would arguably legalize the killing of abortion providers has been tabled; but a bill pending in Texas requires doctors to conduct pre-abortion sonograms for women and to impose on them a description of the fetus’s arms, legs and internal organs. Supporters of this bill insist that it is “pro-woman;” its purpose is empower them and “ensure there are no barriers preventing women from receiving the information to which they are entitled for such a life-changing decision” — barriers like a woman’s right to decline a sonogram or description of the fetus.
But the right wing’s aggressive sectarianism extends far beyond the usual battles over abortion and other culture-war casualties. Just listen to Mike Huckabee gush over Israel (biblical Zionists have been carrying on about Israel for years, but these days they have Tea Party stars on their side.) Michelle Bachmann claims that “if we reject Israel, then there is a curse that comes into play.” Note former Senator Rick Santorum’s defense of the Crusades, which, he laments, have been maligned by “the American left who hates Christendom.” Remember the Bible-based environmental policy of Illinois Congressman John Shimkus, now chair of the House Environment and Economy Sub-Committee. “The Earth will end when God declares it’s time to be over,” Shimkus famously declared in a 2009 hearing. Reading from the Bible and citing God’s promise to Noah not to destroy the earth (again), Shimkus said, “I believe that’s the infallible word of God and that’s the way it’s gonna be for his creation.”
Pay particular attention to Indiana congressman Mike Pence’s revealing declaration that the Employment Non-Discrimination Act, a federal bill prohibiting workplace discrimination against gay people “wages war on freedom of religion in the workplace.” If religious beliefs legitimized workplace discrimination, as Pence advises, then Title Vll of the 1964 Civil Rights Act would be unconstitutional at least as applied to people with religious compunctions against hiring women or members of particular racial or religious groups: If you believe that God did not intend women to hold traditionally male jobs, for example, or if you simply don’t like Mormons, then, in Pence’s view of religious freedom, you have a constitutional defense to employment discrimination claims by female or Mormon job applicants. But I bet that Pence would hesitate to defend a constitutional right to discriminate categorically against women or Mormons in the workplace; and if I’m right, it means he recognizes religious biases as defenses to discrimination claims as long as they’re biases he shares. Pence’s position on ENDA demonstrates the confident, theocratic approach to governing enabled by the Tea Party’s electoral successes.
Of course, Pence and Shimkus, among others, are hardly the first theocrats to land in office. There’s nothing new about the religious right’s drive for political power, which helped sweep Ronald Reagan into the White House in 1980, when liberal stalwarts were swept out of the Senate. What does seem new is the increased dominance of the Republican Party by sectarian religious extremists and their acquisition of power during a prolonged economic crisis and even longer war — a period marked by national pessimism, fear of terror, and a bipartisan assault on civil liberty unprecedented in its scope (thanks to technology) if not its intentions. In other words, what’s worrisome is our vulnerability, susceptibility to demagoguery, and diminishing margin of error. We don’t have time for the unexamined certitudes of religious zealotry.
If only Tea Partiers and their legislative surrogates would take seriously the Constitution and the founding fathers they so frequently invoke. Then they’d respect the First Amendment’s prohibition on government-established religion, which codified the Founder’s belief in a secular, civil government that accommodates diverse religious practices and beliefs. They’d understand that the Establishment clause doesn’t merely bar the federal government from requiring us to attend a federal church; it bars Congress from turning sectarian religious beliefs into law (unless they coincide with practically universal moral codes, like prohibitions on murder.) “People place their hand on the Bible and swear to uphold the Constitution, they don’t put their hand on the Constitution and swear to uphold the Bible,” Maryland State Senator Jamie Raskin once said (to appropriate acclaim.) It’s an accurate statement of law and constitutional ideals, but, sad to say, an increasingly aspirational description of political practice.
By: Wendy Kaminer, The Atlantic, February 25, 2011
Republican Budget Cuts Promote ‘Trickle Up’ Poverty
How appropriate that Washington’s most challenging budget crisis in decade coincides with the Republican Party’s centenary birthday celebration of Ronald Reagan, whose attacks on “welfare queens” and the social safety net in the name of deficit reduction caused indisputable collateral damage to middle class Americans. The Ronnie-like budget cuts that Republican leaders are proposing today—against unemployment insurance, food stamps, Medicaid and subsidized housing—all boast the potential to carry on the Reagan tradition of hurting the very middle class they aspire to help.
Why? Because the cuts to the programs the Republican leadership in the House of Representatives are targeting would increase poverty, and more poverty lowers property values, diminishes the quality of life, and drives up family taxes and expenses of middle class Americans.
Cuts to federal housing programs will increase homelessness. Combine increased homelessness with vacant public housing and you have a cancer that will spread, reducing property values in communities across our nation. Or consider cuts to unemployment and food stamps. These are likely to cause grocery stores in urban, suburban, and rural areas—many of which serve the middle class—to either close or lower the quality and selection of their wares, just to preserve profit margin.
A persistently high unemployment rate may well also translate into desperation and increased property and personal crimes. Not only will more crime lower our quality of life, it will drive up the cost of local policing. That could mean higher local taxes meet crime-fighting demands.
Public schools were once the first choice of middle class families; these schools are the first to fail as poverty rises. Where school was once free, poverty forces many middle class families today to shell out thousands of dollars to educate their children. These new costs are a fact of life for more and more middle class Americans as poverty spreads across the country. Sadly it’s at just the time they can least afford it.
Let’s be clear. No one rejoices at the prospect of spending billions of dollars for subsidized housing or food stamps or Medicaid. And Glenn Beck acolytes and progressives alike can agree that good paying jobs are better for families than a plethora of government subsidies. But the problem is that our economy and the policies that drive it are not creating enough decent paying jobs for all able-bodied Americans to cover their basic household expenses. Federal subsidies for basic needs make up for the shortcomings in our economy. And they help a surprising number of people.
To be sure, we can find ways to run these programs more effectively and more efficiently. And that’s where the hard work of budget cutting should concentrate. The ubiquity of technology, even in low-income communities, presents a huge opportunity to shed administrative costs. We should also find ways to better align these programs so that they enable workers and their families to more successfully move out of poverty. If we are serious about protecting and expanding the middle class, then the tough discussions on how to overhaul the delivery of these income-support programs need to commence.
But it’s simply not in the interest of most Americans to swing an ax at these programs amid a nascent economic recovery. Today, over 10 million Americans are collecting unemployment, and nearly that many citizens are in apartments with rents subsidized by the federal government. More than 40 million Americans put food on the table with the aid of food stamps. Fifty million Americans are able to go to the doctor or the hospital because of the Medicaid program. And fully one in six Americans is dependent on federal and state support for their basic necessities of life.
The consequences of reducing federal income supports will be devastating on the poorest among us. But the impact will not be contained to them. Remember: Ronald Reagan tried to convince us that wealth trickles down. His enduring legacy, however, is that poverty trickles up.
By: Donna Cooper, Senior Fellow-Center for American Progres, February 14, 2011
“Eat The Future”: The GOP And Federal Spending
On Friday, House Republicans unveiled their proposal for immediate cuts in federal spending. Uncharacteristically, they failed to accompany the release with a catchy slogan. So I’d like to propose one: Eat the Future.
I’ll explain in a minute. First, let’s talk about the dilemma the G.O.P. faces.
Republican leaders like to claim that the midterms gave them a mandate for sharp cuts in government spending. Some of us believe that the elections were less about spending than they were about persistent high unemployment, but whatever. The key point to understand is that while many voters say that they want lower spending, press the issue a bit further and it turns out that they only want to cut spending on other people.
That’s the lesson from a new survey by the Pew Research Center, in which Americans were asked whether they favored higher or lower spending in a variety of areas. It turns out that they want more, not less, spending on most things, including education and Medicare. They’re evenly divided about spending on aid to the unemployed and — surprise — defense.
The only thing they clearly want to cut is foreign aid, which most Americans believe, wrongly, accounts for a large share of the federal budget.
Pew also asked people how they would like to see states close their budget deficits. Do they favor cuts in either education or health care, the main expenses states face? No. Do they favor tax increases? No. The only deficit-reduction measure with significant support was cuts in public-employee pensions — and even there the public was evenly divided.
The moral is clear. Republicans don’t have a mandate to cut spending; they have a mandate to repeal the laws of arithmetic.
How can voters be so ill informed? In their defense, bear in mind that they have jobs, children to raise, parents to take care of. They don’t have the time or the incentive to study the federal budget, let alone state budgets (which are by and large incomprehensible). So they rely on what they hear from seemingly authoritative figures.
And what they’ve been hearing ever since Ronald Reagan is that their hard-earned dollars are going to waste, paying for vast armies of useless bureaucrats (payroll is only 5 percent of federal spending) and welfare queens driving Cadillacs. How can we expect voters to appreciate fiscal reality when politicians consistently misrepresent that reality?
Which brings me back to the Republican dilemma. The new House majority promised to deliver $100 billion in spending cuts — and its members face the prospect of Tea Party primary challenges if they fail to deliver big cuts. Yet the public opposes cuts in programs it likes — and it likes almost everything. What’s a politician to do?
The answer, once you think about it, is obvious: sacrifice the future. Focus the cuts on programs whose benefits aren’t immediate; basically, eat America’s seed corn. There will be a huge price to pay, eventually — but for now, you can keep the base happy.
If you didn’t understand that logic, you might be puzzled by many items in the House G.O.P. proposal. Why cut a billion dollars from a highly successful program that provides supplemental nutrition to pregnant mothers, infants, and young children? Why cut $648 million from nuclear nonproliferation activities? (One terrorist nuke, assembled from stray ex-Soviet fissile material, can ruin your whole day.) Why cut $578 million from the I.R.S. enforcement budget? (Letting tax cheats run wild doesn’t exactly serve the cause of deficit reduction.)
Once you understand the imperatives Republicans face, however, it all makes sense. By slashing future-oriented programs, they can deliver the instant spending cuts Tea Partiers demand, without imposing too much immediate pain on voters. And as for the future costs — a population damaged by childhood malnutrition, an increased chance of terrorist attacks, a revenue system undermined by widespread tax evasion — well, tomorrow is another day.
In a better world, politicians would talk to voters as if they were adults. They would explain that discretionary spending has little to do with the long-run imbalance between spending and revenues. They would then explain that solving that long-run problem requires two main things: reining in health-care costs and, realistically, increasing taxes to pay for the programs that Americans really want.
But Republican leaders can’t do that, of course: they refuse to admit that taxes ever need to rise, and they spent much of the last two years screaming “death panels!” in response to even the most modest, sensible efforts to ensure that Medicare dollars are well spent.
And so they had to produce something like Friday’s proposal, a plan that would save remarkably little money but would do a remarkably large amount of harm.
By: Paul Krugman, Op-Ed Columnist, The New York Times-February 13, 2011
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