The Deficit Dog Chasing Its Tail

When a dog is chasing its tail, it might amuse the dog and it certainly amuses spectators but one can be pretty certain that the animal isn't likely to accomplish anything. Right now the Democrats seem to be chasing their own tails and they do not seem to be amusing themselves even if it gives me a laugh.

President Clinton, a man with a great future behind him, is right now the hottest act on the Democratic stage. From Philip Rucker at the Washington Post:

Bill Clinton is baffled. The former president's friends say he is in disbelief that in the closing weeks of the midterm campaigns Democrats have failed to articulate a coherent message on the economy and, worse, have allowed themselves to become "human pinatas."

So Clinton is deploying himself on a last-ditch, dawn-to-dusk sprint to rescue his beleaguered party. And as the only president in modern times who has balanced the federal budget, he is leveraging his credibility to become one of the most fierce defenders of President Obama's economic policies.

The spinning going on in that second paragraph is enough to make one reach for the wall with one hand and a bottle of Pepto Bismol with the other. Yes, to his credit, President Clinton balanced the budget. He did so with the help of a Republican Congress.

So now he is "leveraging his credibility" as a deficit hawk to defend the policies of a President who has signed onto deficits of well over a trillion dollars a year. He is rushing around the country to try to prevent the voters from giving President Obama the Republican majority that made his own fiscal policy possible. One wonders that the dog has not collapsed with exhaustion.

As for the first paragraph, this is one of the most familiar conceits of politicians. If only we had done a better job of articulating a coherent message on the economy, the voters would approve of our policies. If ever that is plausible, it fades into self-deception when the President has given scores of speeches over more than a year and the President's myriad allies in the Press have worn out laptop keyboards trying to articulate that message.

The problem we face is that our government, like those of our European allies, has been fiscally irresponsible for decades. Just right now the British government is trying to get its fiscal house in order. As one articulate back bencher put it, the previous government ran all out of "our money." What is the response of President Obama's allies in the press?

The New York Times is appalled.

There is a time and a place for aggressive deficit reduction. Now is not the time, especially not in Britain.

One can only scratch one's head. Whenever did the New York Times call for "aggressive deficit reduction"? Now is never the time, and especially not, well, here. That paragon of honest economics, Paul Krugman, regards Britain's attempts to keep their state from going belly up financially as an unfortunate fashion statement. Fiscal responsibility is like wanting to wear a funny hat. Spending money so fast it would scare the salt off a drunken sailor, that's rational policy. Okay. It is not inconceivable that they might be right.

If they are, what sense does it make to send Bill Clinton out to rally the base on the strength of his record as a deficit hawk? It only makes sense if the Democrats know that the electorate does not believe what the party believes. The Democratic dog is chasing its tail.

Comments

[Donald Pay]

The current deficit is due to (1) Bush tax cuts, (2) Bush wars, (3) Bush recession.

I'm all for deficit reduction. We need to end the Bush tax cuts for the wealthy while leaving the tax reduction for the middle class and for businesses that create jobs in America. We need to bring the troops home quickly. We need to institute paygo for federal budgeting. We need to close half or more of our military bases.

[KB]

Donald: you are being silly. But it doesn't matter whose fault it is. What matters is what we do about it.

[Donald Pay]

Pretty simple strategy: end the Bush tax cuts to the wealthy, end the wars, end tax cuts and trade policies that encourage outsourcing, stimulate the economy by moving subsidies from nuclear and fossil fuels to energy efficiency and renewable energy, end unfair trade agreements, cut military spending by bringing troops home, cutting domestic military bases, and reforming military procurement, end earmarks, reinstitute paygo, reinstitute polluter pay provisions, continue to reform health care (single payer is best), lift the cap on FICA tax.

You conservatives talk a good game, but it's all politics. Readers will notice you didn't offer anything of value above. It's all criticism of people who have to clean up your fiscal malfeasance. You promise fiscal responsibility and deliver out of control spending. You have bankrupted the country through dumb wars, bad tax policy, bad environmental and energy policy and bad trade policy. You have no answers.

[Miranda Flint]

You've got to love a strategy that hinges on Bill Clinton's credibility!

[George Mason]

Donald; Once again you are demonstrating a total lack of comprehension of basic economics. The only thing you will accomplish by raising taxes on high income earners is a one year bump in revenues taken from the people best able to generate the business that will pull us out of this recession. As a wise man once said, "I never got hired by a poor man." Taking ever increasing amounts of money out of the economy and giving it to the government will only achieve stagnation at best or depression at worst. If you research the effects of the tax cuts instituted by Kennedy, Reagan and Bush you will find a net increase in personal income across all income strata. The greatest shift in people moving out of poverty occurred during the Reagan years. This directly attributable to the tax cuts that lowered the cost of entry for starting or expanding business. This is what puts a demand on labor and increases employment. This type of demand also increases wages. Econ 101 would teach you that price follows the demand curve. So far Obamas actions and policies have suppressed the demand. Increasing taxes will only depress demand further.

[Bill Fleming]

George, really? I was under the impression that the Bush tax cuts
have been in place for 10 years now, and that the income of average
Americans has either stayed flat or gone down. No?

[Donald Pay]

This fetish with the Reagan tax cuts is very interesting, but it doesn't excuse distorting history. Yes, the wages/salaries of highly skilled workers did increase during the Reagan years. This increase was mostly a bicoastal phenomenon. This was the beginning of the tech boom, and had very little to do with tax policy. The Reagan economy also involved a changes in the financial industry, that would later required massive federal bailouts. "Greed is good." In the West, Reagan's massive sell off of federal coal and oil at bargain basement prices spurred reckless development. Meanwhile, the Midwest and Rust Belt were in sharp decline, as rates of unionized work declined and policies favored foreclosing on farms. Rates of poverty actually rose in the midst of this boom. It was class warfare, and the rich were winning.

suppose that's because there was a massive farm foreclosure

[Jon S.]

I recommend you all view the film IOUSA, produced by David Walker of the Peter Peterson Foundation. When Ken and I interviewed Congresswoman Herseth Sandlin on Friday, the congresswoman and I found common ground in our admiration of Mr. Walker. In that film, he says that if we repealed the Bush tax cuts, that would account for only 10% of our fiscal problem. He also estimates that the total cost of the Iraq war is less than 3% of our total fiscal hole. And this is before the stimulus package and the health care bill were passed. Also before President Obama's budget of last year calling for $9 trillion more in debt over the next decade. I think Donald and Bill are off base here. Conservatives (as opposed to professional Republicans) consistently chided Bush over his deficit spending. But what Bush did was peanuts compared to Obama.

See the 30 minute version of the film here (go to about minute 28 for the discussion referenced above):
http://www.youtube.com/watch?v=O_TjBNjc9Bo

[Jon S.]

I recommend you all view the film IOUSA, produced by David Walker of the Peter Peterson Foundation. When Ken and I interviewed Congresswoman Herseth Sandlin on Friday, the congresswoman and I found common ground in our admiration of Mr. Walker. In that film, he says that if we repealed the Bush tax cuts, that would account for only 10% of our fiscal problem. He also estimates that the total cost of the Iraq war is less than 3% of our total fiscal hole. And this is before the stimulus package and the health care bill were passed. Also before President Obama's budget of last year calling for $9 trillion more in debt over the next decade. I think Donald and Bill are off base here. Conservatives (as opposed to professional Republicans) consistently chided Bush over his deficit spending. But what Bush did was peanuts compared to Obama.

See the 30 minute version of the film here (go to about minute 28 for the discussion referenced above):
http://www.youtube.com/watch?v=O_TjBNjc9Bo

[duggersd]

In 2007 Democrats took over the House of Representatives. From that point on, the budget was theirs. Nancy Pelosi pledged "no new deficits". According to the Bureau of Public Debt, upon taking control, the debt was $8.67 trillion. Today it is $13.6 trillion. I believe she has missed her statement by just a bit.
Constitutionally, all spending bills come from the the House of Representatives. When the President proposes a budget, that is all it is, a proposal. In 1994 the deficit began to decrease. This was due to the new leadership in the House, not due to the budgets delivered by President Clinton.
Tax cuts are not the reason for the massive deficits. Excessive spending is.

[George Mason]

Donald; You cannot have a tech boom (or any other type of job producing boom) without the means to finance it. With out the fiscal policies of Reagan there would be no tech boom. Because of the boom of the 80's more people were working, and more people were working at higher incomes. (Which is why Reagan crushed Mondale). The boom was nation wide it was not just the tech industry (Al Gore had not invented the internet yet). That is why revenues more than doubled between 82 and 88. It is also why incomes, have on average, continued to rise until now. The one hiccup came about when GHW Bush, in an attempt to be bipartisan signed on to the tax increases in 1990. Clinton followed that up by shooting a nascent recovery in the head with more tax increases (including a retroactive tax increase) in 93.
Clintons triangulation strategy had him sign on to the "Contract with America" that reduced taxes on investments which provided for the means of economic growth that Clinton is always trumpeting.

[Donald Pay]

The tech boom in the 1980s was not financed by investors. It started in garages and the 20-30 year old employees got a lot of compensation through stock, thus operating costs were kept low. Money was poured back into the company.

When you say "more people were working at higher incomes" that is a vast oversimplication. Highly skilled workers and white collar workers on the coasts did increase incomes. Your average Joe did not. Really, this is pretty well know stuff and it's only the Reagan fetishist that don't want to believe it.

Incomes adjusted for inflation have not risen for the middle class. If all you're using are very crude statistics, you miss reality.

[duggersd]

Donald, those employees getting stock are called "investors". They accept stock in the company in lieu of salary.

[KB]

"The tech boom was not financed by investors..."! Donald. Whatever planet you are living on, I hope it has a pleasant sky. Maybe chartreuse.

[Donald Pay]

Employees paid with stock are called employees. An investor makes a choice, an employee takes what the boss offers. There were few investors risking money for interest or a part of these companies.

I don't credit much of what billionaire Pete Peterson and the Wall Street gangsters have to say on deficits and debt. For two decades they've been squawking about how unfunded liabilities of entitlement programs were going to cause an economic meltdown. They kept harping that the interest on the federal debt depress other needed outlays, like corporate welfare and spending on military hardware. They cackled about the federal debt pushing out productive borrowing (by them, of course) and increasing the interest rates for that borrowing. Their two decade solution: reign in spending that goes to lower income people and institute regressive taxation (value added tax) that would tax lower income people more than the wealthy. That was done---under Clinton. Notice Billionaire Petie and the Wall Street crowd were silent all through the Bush Administration, when the major problems with debt resurfaced.

The problem is Billionaire Petie and the Wall Street crowd always has had it all wrong. The crisis, when it did come, was brought to us not by federal government spending or debt, but by, guess who? It was Billionaire Petie and the Wall Street gangsters with their excesses in the financial system that brought on the crisis. So we are expected to listen to anything these gangsters have to say? I think not. The crisis these gangsters brought on caused the reduction in federal revenue, and the outlays to save the economy.

So, no, if I'm going to watch a movie about gangsters, I'll watch The Godfather.

[duggersd]

Donald, if I own stock in a company, I am an investor. My investment can be in the form of cash or time. I cannot say for absolutely certain this story is true, but I heard it from a couple of people who claimed to be familiar with the story.
If not, the point is the same.
Menards (perhaps you have heard of them) was at one time a small time organization. The owner, John Menard owned his company at at one time could not pay his employees. He offered them stock in the company in lieu of wages. Several took him up on it. The company grew into what is perhaps the 3rd largest home improvement retailer in the nation. Those guys who had stock were made rich by their investment of time.

[Donald Pay]

I don't know if I can buy your Menard's story. Menard's is a privately-held company with John Menard owning all voting stock and his relatives owning all of the non-voting stock that he doesn't own. All company history indicates the company's expansion came from cash flow, not investors.