On Monday’s I take my sons to school and along Interstate 380, between Waterloo and Cedar Rapids, I’ve noticed for the past several years a homemade billboard which changes with some regularity.
Immediately after Obama was elected the sign read “O-Bummer.”
During the Iowa Caucus it read “Restore Sanity- Vote Santorum.” Apparently, the common “san” was enough for the sign maker to equate Santorum with the concept of sanity and think it was poetic wisdom. Of course, that’s as catchy and relevant as “Quit Stallin’- Vote Stalin!” but I digress…
I passed the sign today and it said “17 Trillion.” Obviously, that is meant to say “The national debt has increased to 17 trillion dollars” and I’m sure the editorial point behind it is to say, once again, “O-Bummer.”
Never mind that the debt was created over decades and was exacerbated the most by two wars, tax cuts, Bush’s Medicare prescription drug benefits and dangerously low production due to a giant recession which began before Obama took office.
In the interest of fairness we have to include Obama stimulus spending (although that could be catalogued under the cost of a recession), and Obama did introduce costly new regulations and Medicaid entitlements, which increased the debt by over a trillion dollars. The looming issue, however, is something else.
We can talk, squabble and point fingers as to where the massive debt came from until the Day of Reckoning (or when the Vikings win the Super Bowl, whichever comes first) or we can get serious and talk about our REAL problems.
One obstacle to solutions is the fact that we tend to believe what we read. When we read something over and over, hear about it every day, and from people who present themselves with credibility, eventually it starts to sound like the truth.
Such is the case with the great Debt/Deficit/Budget/Fiscal Cliff debate. We hear so often that it is the debt that is destroying our economy and the evil of deficit spending that almost no one questions that premise anymore.
The Des Moines Register ran an op-ed which compared our household budgets to government spending. It’s a concept that’s easy to understand: “The federal government is exactly like such a family. And its options are exactly the same” read the second paragraph. We’ve heard this often enough and it resonates; “just like my household budget where I have to bring in at least as much as I spend, the government should operate the same way.”
Except that the Federal Government and our households are absolutely nothing alike.
As economist William Mitchell wrote (Bilbo.economicoutlook.net) “But the government is not a big household. It can consistently spend more than its revenue because it creates the currency….governments can purchase whatever they like whenever there are goods and services for sale in the currency they issue.”
I understand the basis of Keynsian economics and it was of interest to me when I ran across this article by Mitchell, critical of Obama’s economic assessment, titled “Beyond Austerity” where he gives a historical perspective to our evolution in and out of free market regulations.
Before I give the impression that Mitchell takes the neo-liberal economic view, I must point out that he vehemently opposes the neo-liberal market philosophy. To further assuage confusion, let me point out the “neo-liberal” economic philosophy is not left wing economics; neo-liberalism stresses the efficiency of private enterprise and relatively open markets, and seeks to maximize the role of the private sector in determining political and economic priorities; in other words, it is the right wing point of view. Mitchell’s criticism of Obama is that he buys into it too often.
“Governments are being pressured to cut deficits despite strong evidence that public stimulus has been the major source of economic growth during the crisis and that private spending remains subdued” (from Beyond Austerity, The Nation Apr 4,2011). “Public deficits do not cause inflation, nor do they impose crippling debt burdens on our children and grandchildren. Deficits do not cause interest rates to rise, choking private spending…”
The Great Depression demonstrated the fallibility of a capitalist market; that it is unstable and susceptible to long periods of unemployment unless there is government intervention. The Hoover economic doctrine is literally what the neo-liberal economists (the entire Right Wing today) are trying to sell to us; that a balanced budget is the solution to market collapse.
Fortunately for them, Americans are short on memory (or didn’t pay much attention in history class) because it was WWII, as our government used deficit spending to fund the war effort, that led to full employment. A leisurely stroll through post industrial American history shows us that it was deficit spending, when supplementing private demand that led to creating jobs.
Many people are not aware of the fact that it was Richard Nixon in 1971 who abandoned the Gold Standard where the government could spend only insofar as taxes were raised or money was borrowed from the private sector. After 1971, however, our monetary system became one that issued its own currency and was not convertible (into a commensurate gold supply) into anything of value but could now be floated and freely traded in foreign markets. As a result, we no longer have to “fund” spending and the liquidity in our system is not limited.
Our government now issues debt to match deficits, not because it is financially sound, but because of pressure from conservatives harkening back to the gold standard era with what has become a politically motivated agenda. By demonizing spending, i.e. entitlements, social programs and federal regulations, it is an easy sell to the public to cut spending, lower taxes and ultimately increase margins.
As Michael Moore (Ooops! I just lost all credibility with my political opposition) once said, “America is not broke. The country is awash in wealth and cash. It’s just that it’s not in your hands. It has been transferred in the greatest heist in history from the workers and consumers to the banks and the portfolios of the uber-rich.”
Moore is dead on target. We keep hearing about our “unsustainable debt” and the number is staggering; it is unsustainable, but the solution is not a straight line to sequestration, rather, we must look at the reason our economy became unstable. Our primary issue is not unsustainable debt, it is Unsustainable Wealth. We allowed 30 years of deregulation and tax loopholes to siphon too much money toward the top until the well was dry.
But don’t take my word for it, just look at history. Look at the economic hills and valleys from post industrial America, through the Great Depression, thru Eisenhower’s tax rates, to Nixon’s redesign of the monetary system, on thru Reaganomics, Clinton budgets, Bush spending and Obama Stimulus. Hold that policy time line up against the historical graph of employment, and productivity and you’ll see for yourself where we’ve been led astray. http://en.wikipedia.org/wiki/Economic_history_of_the_United_States
Debts and deficits are relevant, but not in the way that Republicans are parading in front of us as their leverage to continue neoliberal economic policy. The debt “crisis” is a political manuveur to implement policy to keep taxes lower for the wealthy by reducing spending on programs that can help Americans who are not. The debt is not the balance for the fulcrum that creates jobs and increases production.
I was on the bandwagon of the vocal left wing that called Bush/Cheney out for creating most of this debt 10 years ago, spending like drunken sailors while raping and pillaging progressive taxes and needed regulations, to pander to their cronies. And when Cheney said, “The debt doesn’t matter” I was among the first to call him a self-serving liar. But you know what? It appears that was the one time he wasn’t full of shit.
While I maintain that it was the Bush/Cheney version of neo-liberalism that created this economic crisis through a continued cacophony of deregulation, spending and tax breaks for those who didn’t need them, with a perversion of Mixed Market Capitalism, they didn’t always lie.