Crawford Caligula and the GOP ran up a huge deficit, through the implementation of their only successful program, No Millionaire Left Behind. Now those same Republicans have become deficit hawks, blaming Obama for the deficit and demanding immediate return to a balanced budget. A balanced budget, like the one Clinton left and the GOP squandered on the road to trashing our economy, is a worthy goal. However, this is the wrong time. Robert Reich illustrates this point.
When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. “Bobby,” he said with obvious concern, “you and your children and your children’s children will be repaying the national debt created by Franklin D. Roosevelt.”
I didn’t know what a national debt was, but I remember being scared out of my wits.
Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR’s debt. My granddaughter (almost 2) will never pay a penny of it.
Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.
But now another gaggle of deficit hawks is warning us against more federal spending. “The current federal debt explosion is being driven by an inability to stem new spending initiatives,” warns Alan Greenspan in Friday’s Wall Street Journal [Murdoch delinked], calling for budget cuts and saying “the fears of budget contraction inducing a renewed decline of economic activity are misplaced.”
My dad learned from his mistakes. Alan Greenspan obviously didn’t.
Contrary to Greenspan, today’s debt is not being driven by new spending initiatives. It’s being driven by policies that Greenspan himself bears major responsibility for.
Greenspan supported George W. Bush’s gigantic tax cut in 2001 (that went mostly to the rich), and uttered no warnings about W’s subsequent spending frenzy on the military and a Medicare drug benefit (corporate welfare for Big Pharma) — all of which contributed massively to today’s debt. Greenspan also lowered short-term interest rates to zero in 2002 but refused to monitor what Wall Street was doing with all this free money. Years before that, he urged Congress to repeal the Glass-Steagall Act and he opposed oversight of derivative trading. All this contributed to Wall Street’s implosion in 2008 that led to massive bailout, and a huge contraction of the economy that required the stimulus package. These account for most of the rest of today’s debt.
If there’s a single American more responsible for today’s “federal debt explosion” than Alan Greenspan, I don’t know him.
But we can manage the Greenspan Debt if we get the U.S. economy growing again. The only way to do that when consumers can’t and won’t spend and when corporations won’t invest is for the federal government to pick up the slack.
For Greenspan now to say we don’t need more stimulus — when 15 million Americans are still out of work, when retail sales are dropping, when the rate of mortgage delinquencies is still in the stratosphere, when Europe and Japan are tightening their belts — is like Tony Hayward saying the Gulf spill shouldn’t worry us.
America’s long-term debt bomb is a future problem to be sure. But it has nothing to do with current spending initiatives. It will be due mainly to baby boomers’ demands for health care.
Our immediate challenge is to get enough demand back into the economy to pull ourselves out of the deep hole Greenspan helped create… [emphasis added]
Inserted from <Huffington Post>
The GOP agenda here is quite clear. Their leadership has to understand that such austerity will only exacerbate the recession they caused. They don’t care how many people they put out of work. They don’t care how many Americans suffer. They care only to cause this Democratic administration to fail, in the hopes that they can return to power as a result. Obama and elected Democrats cannot afford bipartisanship. A booming economy will reduce the deficit, and we must do whatever it takes to stimulate the economy until it recovers.
10 Responses to “Beware the Deficit Hawks!”
Sorry, the comment form is closed at this time.
“Greenspan supported George W. Bush’s gigantic tax cut in 2001 (that went mostly to the rich), ”
This page
http://www.heritage.org/Research/Reports/2007/01/Ten-Myths-About-the-Bush-Tax-Cuts
has some interesting facts also about Bush’s tax cuts for the middle class:
# Economic growth rates have more than doubled since the 2003 tax cuts; and
# The tax cuts shifted even more of the income tax burden toward the rich.
Heritage Foundation, DM? We might as well use the Flat Earth Society as an information source for orbital mechanics. The Heritage Foundation is a prime proponent of the trickle down theory. But nothing trickled down. It gushed up to create the worst imbalance of wealth in our nation’s history.
Nevertheless, I swallowed my skepticism, read the article and followed its links to its sources. Perhaps the reason that, like trickle down, it has nothing in common with reality is that all the references are tautological.
I love the graphic! Puts things into perspective without saying much.
I remember an article that interviewed Greenspan years ago – I want to say it was in something like Newsweek or Time. In the article, Greenspan basically said his policies were designed to get rid of the surplus because having it around was like having a back door for socialism to enter. He feared all that spare money floating around was going to be put into social programs, so he figured the best way to stop socialism was to put America further into debt…
Thanks Kevin. It comes from Swashzone.
I have read several articles by Greenspan in which he said that big government should be starved.
Kevin K – the Repubs have socialism on the brain. A little socialism, balanced with a free market is not a bad thing. They just can’t stand having a surplus around.
Alan Greenspan is now a discredited idiot for what he did to the economy. No one should ever trust a word he says about it again – EVER.
We do need this stimulus to get back to work – once that happens, the deficit will slowly drop. But if the Repubs are in charge again, we’ll go into a full blown depression. I’m not an economist and I even know that.
Imagine being robbed at gun point and having to prove your police insurance policy was valid, before police would intervene. Socialiam in some areas is essential.
Lisa, you are probably more an authority on economics than I, but that is ovbious to me too.
Well, I can honestly say that Greenspan was probably right about a surplus in a budget. I would love for the government to learn to save for a ‘rainy day’ (It’s freakin’ pouring out right now!!). But, I also know that would never happen. If the government EVER ran a surplus, or savings, EVERYONE would be out for money and blood. Taxpayers would scream about getting taxed too much, and since the gov has a surplus, they should back off of us. The social programs WOULD cry a river about how many more people can be mismanaged if the government wasn’t so stingy with the surplus. Corporations would cry over being taxed too much AND would be asking for contracts to ‘further peace through more firepower’ or ‘creating new technologies’ that can be produced overseas. No, as much as Greenspan screwed the pooch, he is right on this. Socialism is not just social programs anymore. It’s contracts, tax cuts, tax incentives, etc., etc., etc,
Also, the US government has not run a surplus… ever. We have been at 0 debt, but never a surplus. I also disagree when citing all the GOP Presidents, and then people glazes over Clinton. It was during the Clinton administration that the bank deregulation was slipped into a budget he signed. Clinton is the one that gave China ‘preferred nation’ status. Clinton signed NAFTA. Clinton’s ‘surplus’ was made by including money taken in for Social Security. While his deficits were smaller, if he had put the Soc. Sec. money where it was supposed to go, he would not have tamed the ‘deficit tiger’ as many would have us believe. Was he better than the rest? Mostly, but not what I see him elevated to. The economy did pretty well under the Clinton admin. I know that it was a GOP Congress, but he proved that he could deal with a GOP Congress by shutting down the government when a budget wasn’t passed. He knew how to play hardball, He should have done it more than he did. Scandals be damned, do what needs to be done. Why DIDN’T he TRULY balance the budget? Well, according the Dem’s spin machine (and a little Wall Street accounting) he did. Well, I want it told by an accountant that doesn’t have a political agenda to tell me that someone can do it.
They all suck. Period. Canada looks better by the day. Obama can get the money, but he can’t spend it correctly. There SHOULD have been more stimulus in the stimulus. Every bridge in America should be on a schedule for either A) replacement or B) touch up. Are they? Nope. More than a few are on the Interstate Highway system and can be directly controlled by Washington under ‘ensuring trade and regulating interstate commerce’ rules. If the Federal Government is the ‘Bank of Last Resort’ why can’t small businesses deal directly with the Federal Reserve to get a bailout? Nope. Bernake/Geithner will have NONE of that logical nonsense. How about an agency that is like the Job Corp finding solutions to the oil spill? Nope. Still need to watch it for a while, see if a bigger top hat will make it better and watch the first shot at a relief well fail… In August. I’m sure that the Big Oil companies will pool their resources and come up with a solution. Some year.
I do agree that for the time being the Government is the only source of spending in the US, and needs to continue being so. I think that the GOP knows that, too and this is another ‘make Obama fail’ attempt. Whatever. We need more than just extended unemployment, though. We need to start PRODUCING something. Anything. This is where the government should be directing its efforts. Maybe we need to pass a bill that says that anything purchase for the US is built in the US, not just a ‘domestic provider’ BS that they are considering to piss off China. There is nothing that mandates that it is PRODUCED here, it just has to be an American company. Nice. Thanks for the reach around, with sandpaper.
The compromise thrown (actually, I would make it the deal that is being made, no negotiation) is that once GDP has been over 3% for a full year (all 4 quarters), unemployment is under 5%, and the trade deficit narrows to under $200 billion, then a balanced budget with repayment of debt needs to be put together. This means that the US is growing, employed, and producing. There is NO EXCUSE not to balance the budget at that time.
Otis, when I said Clinton left a surplus, I was speaking with respect to deficit, not with respect to debt. I certainly agree that Clinton was wrong about a lot of things. The only thing that makes him appear to walk on water is that he preceded the worst president in US history.
I would rather buy American, but every time I want to buy something, either no US company makes it, or they just assemble it from foreign parts.
Your deal looks good to me, with one caveat. We need real growth of 3% or more. GDP boomed under the first years of the Bush regime, but it was all paper growth. Like you say we need to start producing something. I see extending unemployment as just a stop gap measure.
FDR’s deficit spending not only won World War II but it also got America out of the Great Depression.
No question here, FDR aided, perhaps unwittingly, by a more ruthless paper-hanging despot with a complete disregard for classical economics. That godawful war got things moving again after the Great Depression. and Roosevelt was cognizant of this.
I know he was, Ivan. And after the war, deferred demand kept the economy booming for years.