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05/25/2010 Entry:
Where Did Our Deficits Come From?
Republicans scream "deficits." Tea Partiers scream "deficits." Fox anchors scream "deficits." The hard-right that did most to bring us deficits scream the loudest about deficits. Before Obama became president, deficits did not matter. Now that Democrats are in charge, the biggest problem for the far-right is to "bring down the deficits."
The deficits are a direct result of Republican policy. It began with Reagan, who blamed government for all our ills. He thought, What's the best way to reduce the power of the federal government? Cut taxes. Without taxes the government has no income and can't do all it wants to do. For a brief period, President Clinton restored the financial order. But when George W. Bush became president, he decided to reduce government power in a big way. He cut taxes as often as he could. He even decided to pay for the Iraq War by cutting taxes!!
Another Republican policy that is part of the Reagan "revolution," is deregulation. Deregulation allowed corporations to do as they pleased. They raised prices, reduced wages, forgot about safety, killed off unions, sold shoddy products, provided lousy service and combined into huge conglomerates and into "too-big-to-fail" monsters that produced the terrible depression we are faced with today.
Republicans want to solve our economic problems with the same approaches they used to bring about this economic mess. Suddenly, they realize that the same deficits they thought were good (when Republicans are in office), are terrible (when Democrats are in charge). Before they were going to reduce government by increasing deficits; now they want to reduce government by decreasing deficits.
How do they want to decrease deficits? Two ways: Tax cuts (a universal solution) and by stopping Obama from spending money. Obama, they claim is the big spender. He wasted money on the stimulus to revive the economy, on the TARP that bailed out financial institutions and on other ways to improve our economy. What should Obama have done instead? Why, of course, tax cuts.
Jonathan Chait presents a diagram showing clearly the expected future federal deficits due to the policies of both Bush and Obama:
The diagram presents the Congressional Budget Office estimate of the federal deficit for the ten year period of 2009 to 2019. It demonstrates the effect of 5 factors: the economic downturn, TARP, recovery measures, Bush tax cuts, and the Iraq and Afghanistan wars. The downturn at first increases the deficit and then decreases somewhat. TARP influences the deficit for about a year. Recovery measures boost the deficit considerably for a couple of years and then die out. Bush tax cuts are responsible for a considerable part of the deficit and the deficit due to them increases greatly with time. The deficit due to the wars don't change much.
It's remarkably obvious that Obama's contribution to the deficit is tiny (recovery and TARP measures) compared to the huge contributions by Bush (wars, downturn and especially tax cuts).
Larry Summers is suggesting that we need another stimulus to help produce jobs. I can see the Republican noise machine screaming about increasing the deficit. If we want to decrease the deficit we need to spend the stimulus money now in order to reduce the deficit in the future.
However, the easiest way to reduce our future deficit is to get rid of Bush's tax cuts for the rich.
Where did our deficits come from? They came from our fetish on deregulation and tax cuts. We must restore regulation of corporations so they do not drive us off a cliff again. Instead of tax cuts, we need tax increases to be paid by the corporations and billionaires to help us get out of this depression.
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