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
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
Health Care and Freedom
Rep Marsha Blackburn, (R-TN) argues that health reform will make Americans "less free".
“Today is the death of freedom as a cause for celebration,” Rep. Marsha Blackburn just said as she opened the House Republicans’ argument against the health-care bill. Her stem-winder was quick and clean. This bill, she argued, will make Americas less free.
There is a tendency to think this sort of inane hyperbole an innovation of our polarized age. But it isn’t. When Medicare was being considered, the American Medical Association hired Ronald Reagan to record a record housewives could play for their friends. It was called Operation: Coffee Cup, and you can read the text here.
Reagan was a more graceful speaker than Blackburn, but his point was much the same. Kill the bill. “If you don’t do this and if I don’t do it,” he said, “one of these days you and I are going to spend our sunset years telling our children and our children’s children, what it once was like in America when men were free.”
Well, the bill passed. And moments ago, Rep. Paul Ryan was on the floor of the House, bellowing against Democrats who would dare propose “across-the-board cuts to Medicare.” This is breathless opportunism from Ryan — he has proposed far deeper across-the-board cuts to Medicare, and is making arguments against the Democrats’ bill that would be far more potent and accurate if aimed at his own — but leave that aside for a moment. The GOP’s embrace of the program that Ronald Reagan fought, and that Newt Gingrich sought to let “whither on the vine,” is based on the lived experience seniors have had with the bill: It has made them more, rather than less, free.
Blackburn’s introduction aside, people do not “celebrate” the freedom to not be able to afford lifesaving medical care. They don’t want the freedom to weigh whether to pay rent or take their feverish child to the emergency room. They don’t like the freedom to lose their job and then be told by insurers that they’re ineligible for coverage because they were born with a heart arrhythmia.
When faced with the passage of programs that would deliver people from these awful circumstances, the Republicans adopt a very narrow and cruel definition of the word “freedom.” But when faced with the existence of programs like Medicare, and the recognition that their constituents depend on those programs to live lives free of unnecessary fear and illness, they abandon their earlier beliefs, forget their dire warnings and, when convenient, defend these government protections aggressively. There’s nothing much to be done about that. It is, after all, a free country. But Americans should feel free to ignore these discredited hysterics.
By: Ezra Klein-Washington Post | March 21, 2010; 3:02 PM ET
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