Tag Archives: recession

On Deficit And Recession

President George W. Bush and the Republican Congress he worked with, added nearly $5 trillion to the national debt during his first six fiscal years. Members of The Rational Middle will not be surprised to read that statement. Bush’s doubling of the debt is not the reason for the Great Recession. Perhaps that statement is a surprise. A singular fact of economics needs to be understood by the citizens of this democracy, and that knowledge is needed now more than ever: budget deficits do not cause recessions.

Throughout this recession and recovery, the fact that budget deficits have nothing to do with recessions has been consistently ignored by those that do understand. Linking the two items has political benefits for both sides of our rusted two party system. Democrats were able to hammer Bush for his war spending and top heavy tax cuts, Republicans are able to hammer Obama and the Democrats for social and infrastructure spending. The Tea Party is able to lash out in anger at everyone, because the political figures in that group lack even the most basic knowledge of anything fiscal.

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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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It’s The Economy, Stupid

Political guru James Carville famously wrote “It’s the economy, stupid” on the wall at Clinton headquarters during the 1992 presidential campaign. The logic is simple: when people have jobs that pay enough to cover the bills and provide for some entertainment, they are happy. If the voters aren’t happy, they will generally view the current administration as the cause of their distress, and take out their frustration on incumbents. This little nugget of political wisdom is amplified by the general lack of understanding amongst regular voters about real economics.

Economic indicators generally lag; Reagan and the Republicans were hammered in the 1982 mid-terms for sky-high inflation that was the sum total of government policy and central bank strategy from the 1970′s. Although he was the V.P. during the Reagan years and bore some culpability, George H.W. Bush was punished in 1992 for a recession spurred on largely by Reaganomics and a fairly normal inventory cycle downturn. In all likelihood, President Obama and the Democrats will be punished for an economy defined by failed policies from the Bush Administration, Clinton Administration, and the Greenspan/Bernanke Fed.

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