Tag Archives: deficit

Midterm Mythology

What are we really voting on next Tuesday? The major issues in our democracy have been obscured behind layers of political white noise and an avalanche of innuendo. Long gone are the days when you could simply support or oppose abortion, supply-side economics, the nuclear triad, or welfare for the poor. The last two years have seen mounting campaigns against phantom enemies; conservative political operatives in particular have learned well the lessons of airborne electronic warfare. In that martial field the production, via chaff or digital signals, of false targets is a principle way to hide your own airplane.

And so politicians in this new American theater of operations have mastered the art of the straw man. Build him up and tear him down; just so long as the public doesn’t know the difference between the real subject and the red herring. The mythology of this midterm cycle began with, and has been mastered by, Republicans. But Democrats have fought back, usually clumsily, with their own brand of subterfuge. Regardless of who takes the tactical battles this Tuesday, our democracy has been dealt a stunning strategic setback this cycle. A brief summary of this campaign’s myths and legends follows after the break…what follows after the election is anybody’s guess.

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The Father, The Son, And The Holy Tax Cut

The archetypal American politician works the rope lines at small town parades, shaking hands and kissing babies. Politicians also like to give out tokens of their appreciation to the constituency, party favors and earmarks usually go over well. This is a time-honored ritual that is not without redeeming qualities. Representatives serve at the pleasure, and for the benefit, of the citizens in their districts. Good constituent service, and the ability to remember someone’s name, go along way with the average voter.

Other redeeming qualities long appreciated, have fallen under scrutiny in these volatile times. Earmarks, as an example, used to be a measuring stick for the effectiveness of a member of Congress. The items now derisively referred to as pork-barrel spending are nothing more or less than targeted line items; projects in the district that allow federal taxes harvested from the area to return to the area. Having spent some time looking at earmarks myself, I have seen some crazy ones. But most voters would be surprised at the rather mundane and mostly reasonable list of projects completed with federal tax dollars. Far from the vagaries of the main body of the federal budget, earmarks represent transparent spending that is easy to track and evaluate.

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Bailouts And Stimulus, What The Heck?

TARP, Wall Street, big banks, investment banks, car companies, Stimulus, housing bubbles, Fannies & Freddie, deficits, exploding deficits, extended unemployment benefits, lions, tigers, and bears…oh my! I really don’t blame folks for screaming; “What the heck is going on!” In answer to all of this complexity, some news outlets and politicians have “simplified” the situation for us common folk. In their words, the bailout and stimulus, TARP and other measures are all the same deal. And, in the common refrain of our time, they are all President Obama’s fault.

Of course, some of this is the responsibility of our current president, while some of the “blame” goes to the previous president. It is my contention that most of this activity was necessary and effective, if not always executed with the greatest efficiency. Our economy is in a bad way now, but it would have been much, much worse. I think it is critical that we explore these issues, because the policies that made them necessary are threatening to make a second pass. The story of the Great Recession is a story of Americans spending a great deal of money without getting much of substance in return.

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Ready, Fire, Aim

Something doesn’t make sense. The process is askew. Shouldn’t aim come before fire? The media and Congress are operating today, based on their actions, as though a debt crisis is our great national problem. The people don’t believe that; poll after poll find jobs and the economy are more important than the federal deficit. We are constantly told that Congress went against the wishes of the people when they voted for health care reform. The same polls tell Congress that jobs matter more than the deficit; where is the drumbeat for action on that front?

I can hear folks thinking already; the people say jobs, but what do the professionals say? Economists have been beating the drums for real stimulus for over a year now. The collapse of the housing bubble blew a $2 trillion hole in the economy; a hole that resulted in precipitous falls in state and federal income tax and local sales tax collections. Better than half of our current federal deficit is a direct result of the recession; a fact which means once people go back to work, that potion of the deficit will no longer be an issue. The professionals are calling for federal action on jobs, the people are calling for federal action on jobs, the media are being led like sheep towards the false idol that is debt crisis.

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The Fraud Of Private Social Security

The pundits are in overdrive on the subject of the so-called entitlements. The theme of conversation is fairly simple;

  1. Greece and Portugal are broke
  2. Greece and Portugal are large welfare states
  3. The U.S. welfare state is large and growing
  4. The U.S. will soon be broke
  5. We need to dismantle the U.S. welfare state

The pundits certainly are in overdrive,  and proving every day that speed does in fact kill. The ultimate target of this theme, a theme being driven through financial reporters who got F’s in their ECON 101 courses, is the privatization of Social Security and Medicare. Never mind the brief use of Medicare as a tool for the right in its fight against health care reform. That was then, this is now. Privatizing the two pillars of the U.S. retirement system would drive $2 trillion or more annually, into the hands of Wall Street investment concerns. We have all seen how much profit those boys on the Street can generate even while they are losing their investor’s money. Combined with Grover Norquist’s push to strip away taxes and Americans making more than $250,000 per year, and you get a $2.5 trillion Wall Street windfall; an annual bailout if you will…and a redistribution of money away from the working class.

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Deficit Hawks

Deficit hawks are in the news a lot lately, and it seems that the label is one that every politician aspires to earn. Who wouldn’t want to be associated with “fiscal responsibility” and “sound financial management”? In the interest of full disclosure, I must admit to being proud of President Clinton’s accomplishment (achieved through the Deficit Reduction Act of 1993, and not through the efforts of a GOP-majority House not in office until 1995). He managed to start paying down the debt largely incurred on President Reagan’s watch. I was even aggressively critical of President Bush’s expansion of federal debt (for those with short or tea-compromised memories, he doubled the debt during his term).

Here’s the thing; in as much as I was critical of debt and deficit for debt and deficit’s sake, I was wrong. Basic economics tells us that, for the United States, there is no term risk of bankruptcy to worry about. Large and accelerating structural debt is a problem when matched with a national economy humming along near full capacity. The threat, if the above happens, is inflation. I know that techno-jargon is annoying friends, but this is important. When you hear someone frantically warning of “our debt crisis”; ask them why. Our economy is currently nowhere near full capacity, and won’t be anytime soon. The market continues to accept low interest rates on long term federal debt, meaning that it does not consider that debt to be risky. We are not Greece. We can print the money that our debt is denominated in, with the risk again, being inflation. Greece can’t print their own money. and they can’t manage interest rates within their economy either. We can.

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