Tuesday, June 12, 2012

Where did the US federal deficit come from? (#3) – Bruce Bartlett on the fiscal consequences of the Bush II administration

I've already addressed that question here & here & elsewhere ... but there's so much propaganda, misinformation, and genuine misunderstanding about these matters that it's worth coming back to them periodically.

Essentially, the long-term tendency toward ever-increasing US federal deficits was set in motion during the Reagan administration and then continued by Republicans who had learned the lesson, as Dick Cheney put it, that "Reagan proved deficits don't matter".  (Except, curiously enough, when Democratic presidents are in office—then Republicans start hyperventilating about out-of-control deficits again, at least temporarily.)  The Clinton administration made a heroic effort to reverse this dynamic and brought it under control, so that by the end of 1990s the US federal government was actually running surpluses. Then in 2000 the Republicans recaptured the presidency (it would be a bit of a stretch to say they won the 2000 presidential election) and decided to throw a party. We're still living through the hangover.

In column today Bruce Bartlett—recovering Reaganite, disillusioned Republican, and genuine deficit hawk—tallies up "The Fiscal Legacy of George W. Bush". Read the whole thing, but here are some highlights:
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul. He is the author of “The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take.”

Republicans assert that Barack Obama assumed sole responsibility for the budget on Jan. 20, 2009. From that date, all increases in the debt or deficit are his responsibility and no one else’s, they say.

This is, of course, nonsense – and the American people know it. As I documented in a previous post, even today 43 percent of them hold George W. Bush responsible for the current budget deficit versus only 14 percent who blame Mr. Obama.

The American people are right; Mr. Bush is more responsible, as a new report from the Congressional Budget Office documents.

In January 2001, the office projected that the federal government would run a total budget surplus of $3.5 trillion through 2008 if policy was unchanged and the economy continued according to forecast. In fact, there was a deficit of $5.5 trillion.

The projected surplus was primarily the result of two factors. First was a big tax increase in 1993 that every Republican in Congress voted against, saying that it would tank the economy. This belief was wrong. The economy boomed in 1994, growing 4.1 percent that year and strongly throughout the Clinton administration.

The second major contributor to budget surpluses that emerged in 1998 was tough budget controls that were part of the 1990 and 1993 budget deals. The main one was a requirement that spending could not be increased or taxes cut unless offset by spending cuts or tax increases. This was known as Paygo, for pay as you go.

During the 2000 campaign, Mr. Bush warned that budget surpluses were dangerous because Congress might spend them, even though Paygo rules prevented this from happening. His Feb. 28, 2001, budget message reiterated this point and asserted that future surpluses were likely to be even larger than projected due principally to anticipated strong revenue growth.

This was the primary justification for a big tax cut. Subsequently, as it became clear that the economy was slowing – a recession began in March 2001 – that became a further justification.

The 2001 tax cut did nothing to stimulate the economy, yet Republicans pushed for additional tax cuts in 2002, 2003, 2004, 2006 and 2008. The economy continued to languish even as the Treasury hemorrhaged revenue, which fell to 17.5 percent of the gross domestic product in 2008 from 20.6 percent in 2000. Republicans abolished Paygo in 2002, and spending rose to 20.7 percent of G.D.P. in 2008 from 18.2 percent in 2001. [....]
Bush II and the Republican Congress also embarked on major spending increases that they made no effort to pay for, including a new Medicare Part D entitlement that was notoriously unfunded and two significant wars accompanied by the major tax cuts just mentioned—a combination that I believe was unprecedented in US history. I refer you to Bartlett's discussion for those and other details. But now please read this conclusion carefully:
Putting all the numbers in the C.B.O. report together, we see that continuation of tax and budget policies and economic conditions in place at the end of the Clinton administration would have led to a cumulative budget surplus of $5.6 trillion through 2011 – enough to pay off the $5.6 trillion national debt at the end of 2000.

Tax cuts and slower-than-expected growth reduced revenues by $6.1 trillion and spending was $5.6 trillion higher, a turnaround of $11.7 trillion. Of this total, the C.B.O. attributes 72 percent to legislated tax cuts and spending increases, 27 percent to economic and technical factors. Of the latter, 56 percent occurred from 2009 to 2011.

Republicans would have us believe that somehow we could have avoided the recession and balanced the budget since 2009 if only they had been in charge. This would be a neat trick considering that the recession began in December 2007, according to the National Bureau of Economic Research.
They would also have us believe that all of the increase in debt resulted solely from higher spending, nothing from lower revenues caused by tax cuts. And they continually imply that one of the least popular spending increases of recent years, the Troubled Asset Relief Program, was an Obama administration program, when in fact it was a Bush administration initiative proposed by the Treasury Department that was signed into law by Mr. Bush on Oct. 3, 2008.

Lastly, Republicans continue to insist that tax cuts are highly stimulative, often saying that they add nothing to the debt, when this is obviously ridiculous.

Conversely, they are adamant that tax increases must not be part of any deficit-reduction package because they never reduce deficits and instead are spent. This is also ridiculous, as the experience of the Clinton administration clearly shows. The new C.B.O. data confirm these facts.
=> Andrew Sullivan adds:
When you check reality, rather than the alternate universe constantly created by Fox News and an amnesiac press, you find that Bush had a chance to pay off all our national debt before we hit the financial crisis - giving the US enormous flexibility in intervening to ameliorate the recession. Instead, we had to find money for a stimulus in a cupboard stripped bare - its contents largely given away, by an act of choice. I'm tired of being told we cannot blame Bush for our current predicament. We can and should blame him for most of it - and remind people that Romney's policies: more tax cuts, more defense spending are identical. With one difference: Bush pledged never "to balance the budget on the backs of the poor."

Mitt Romney has no qualms about doing that very thing. And he will, if he is given the chance.
Correct. Bush II at least claimed to be a "compassionate conservative." In the current discourse of national Republicans, that pretense has been abandoned—and this definitely applies to candidate Romney, not just to the passel of cranks, clowns, and dangerous loons he defeated in the Republican primary.

Well, perhaps Romney is just pretending to be callous, mean-spirited, xenophobic, and extremist, first to win the nomination and then to fire up the so-called Republican "base". If he wins in November, we may get a chance to find out. What is indisputable is that his whole economic message, and that of the Republican Party more generally, is based on falsehoods, distortions, transparent fallacies, and cynical demagoguery. We'll see whether it works.

Yours for reality-based discourse,
Jeff Weintraub

Saturday, June 09, 2012

Theda Skocpol explains why the 2012 presidential election is set to be "one of the most important elections in American history"

What is at stake in the 2012 US presidential election?  Actually, the stakes are dramatically high–and no, that's not overheated campaign rhetoric.  If anyone needs a wake-up call about this, I recommend reading a recent interview with Theda Skocpol in Juncture, the journal of the Institute for Public Policy Research in Britain. Skocpol explains why this is shaping up to be "one of the most important elections in American history"; in fact, she argues, it could well be "a turning-point election," one way or another.

Her argument strikes me as cogent and convincing.  And that's true despite the fact that, in my view, Skocpol addresses only some of the reasons why a Republican victory in November would not only be disastrous in the short run, but would also help to consolidate and reinforce some of the most dangerous, undemocratic, and generally pernicious long-term tendencies in American society and politics.

The interview is not that long, and worth reading in full.  For a start, here are some highlights, including Juncture's introductory mini-bio.

–Jeff Weintraub

Juncture interview: Theda Skocpol
May 16, 2012

Theda Skocpol is the Victor S Thomas professor of government and sociology at Harvard University and one of the US’s leading public intellectuals. Her work is breathtaking in its range, covering comparative politics (States and Social Revolutions, 1979), US social policy (Protecting Soldiers and Mothers: The Political Origins of Social Policy in the United States, 1992) and studies of democratic culture (Diminished Democracy: From Membership to Management in American Civic Life, 2003). She is a self-confessed ‘New Deal Democrat’ and continues to work tirelessly to achieve progressive change, most recently by setting up a Scholars Strategy Network for left-leaning academics to promote and inform debate. Her latest book, The Tea Party and the Remaking of Republican Conservatism (2011), has been described as ‘the definitive study of the Tea Party’. Juncture met Professor Skocpol at the Kennedy School in Boston.


Juncture: How will history judge the first Obama presidency? A missed opportunity, or did he face constraints so strong that he achieved what he could?

Theda Skocpol: We have to talk about Obama and the Democratic party in Congress – they arrived together and that’s what created a chance to change direction in American public policy. I think that they accomplished quite a lot given the enormity of the simultaneous crises they were facing – first the financial crash and then the recession that engulfed Main Street. You can certainly argue that Obama was caught in the trap of trying to save the financial system and did not explain to Americans sufficiently well the need for a bold recovery policy, and he didn’t focus perhaps enough on job creation. But he did get through, with the aid of the Democrats in Congress, a stimulus programme that saved the US economy and probably the world economy from a plunge into a great depression. He saved the American automobile industry, which has really turned out to be quite a triumph and very important to the social and economic fabric of the midwestern states.

He and the Democrats also fashioned an historic and important healthcare reform. It is hugely complicated and yet another one of these things where you send the Congress people off to reach a 1,400-page deal that nobody can understand. And people will make fun of Obama if the Supreme Court – the five right-wing ideologues on the Supreme Court – turns the Affordable Care Act into ashes. But I think that they did a gargantuan job in getting it through in the face of extreme obstruction. They have faced a level of obstruction from the ‘out party’ – the Republicans – that has not existed in American politics since the era before the civil war.

Could Obama have been bolder? Partly yes and partly no. The 2008 campaign was unusually bold for an American Democrat – Obama spoke about the need to raise taxes on the rich and he has never flinched from that. That does not sound like much – it actually isn’t much, given the historic increases in wealth and income inequalities in the US – but by the standards of the US Democratic party, which has been wimpy in the extreme on these issues, he did articulate important themes which he has stuck to. When his efforts to compromise were spurned for the 100th time, and when they squeaked by in that very radical moment in the summer when a significant group of right-wing Republicans were prepared to not raise the debt ceiling – which would have had catastrophic consequences – he began to articulate a clearer contrast with the Republicans. I think he is going to stick with that through to the election, as he gives up on his earlier efforts at bipartisanship. This coming election is going to be one of the most clear on issues of socioeconomic inequality and distribution and taxes of any that we have had in the US in a long time.

J: Lots has been written about the impact of the Tea Party on the Republican primaries, but looking further ahead, what will be the ongoing impact of the Tea Party on US politics?

TS: Well the Republican Presidential candidates, including Mitt Romney, who will be the nominee, have all explicitly endorsed both grassroots and elite Tea Party priorities. Getting rid of healthcare reform, or at least eviscerating it if they can’t get the lot off the books; cracking down on immigration: illegal immigrants who are here as well as those who might enter; cutting taxes further on the very wealthy, and privatising social security and Medicare – these have all been signed up to. They are breathtakingly radical stands. If Romney is elected he will probably be there with a Republican majority in both the Senate and the House and in the first three months he will sign bills that destroy healthcare reform, push privatisation of social security and Medicare, and cut taxes. In many ways he is the ideal Tea Party candidate – electable, but someone who will deliver their agenda.

If Obama wins, clearly it’ll be different. [....] So I expect Tea Party forces, if not necessarily the label, to continue to play a role, but that role will be quite different depending on whether it is a Republican who is elected or Obama.

J: Thinkers like Ruy Teixeira have written about how demographic trends, such as a younger and more diverse electorate, could favour the Democrats. Does this mean that the Tea Party should be understood as a kind of rightwing ‘death rattle’ and that whoever wins the 2012 election, the future is bright for progressive politics?

TS: This is a potentially dangerous way of looking at it. I am not a social or economic determinist of any kind. I don’t believe that economic forces have only one possible political expression. Nor do I believe that demography is destiny in any simple sense. It’s true that at this moment the Republican coalition is old and white; Mitt Romney, if he loses, will lose because he cannot fashion much of an appeal to the Latinos he’s been routinely bashing during the primaries. (I suspect he’ll try to make a wealthy conservative Cuban – Marco Rubio – his running mate, but I don’t think that’ll be enough.)

But let’s just keep in mind that policy watersheds shape politics as well as the other way around. So if healthcare reform survives and if it provides a modicum of health security for lower income people and new regulatory protections to middle class people, then that, along with the survival of even a slightly trimmed-back Medicare and social security, will cement the Democratic party’s appeal to the broader middle class. It will allow a transition to incorporating younger people and a more racially diverse electorate to blow winds into a centre-left Democratic party.

But there are forces on the right who understand that they are close to their last chance – to use an American football analogy, it’s in the final two minutes and they have got to get that ball down the field and score a touchdown. They understand the importance of this election much better than the befuddled people on my side. They understand that if they can destroy or eviscerate healthcare reform, if they can change social security and Medicare for future generations (they will grandfather and grandmother the Tea Partiers, but they want to change them for people 55 and younger) then they can turn afterwards to making an appeal to the growing Latino population and to the younger generation around somewhat more free-market principles.

After this election they’ll have to change – they’ll have to give up some of their ‘dead-endism’ over their opposition to gay marriage for example. Republican elites already understand that. But by winning they could very well buy themselves five to 10 years to make this shift, because they’ll be associated with whatever economic recovery occurs and they will have destroyed policies that could have built political identities and coalitions which they understand would have been a threat.

So this is a turning-point election – this is one of the most important elections in American history coming up, not because Obama is some world-striding superman but because he has slightly turned the direction of the nation and the Democratic party, and if his turn is overturned at a critical juncture there may not come another opportunity for a while, and by then the identities and the interests may not be exactly the same. I think the 2012 election is going to be one of the most riveting, most hard-fought no-holds-barred elections in US political history – and that says something.

[JW:  Etc.  Read the rest here.]

Thursday, June 07, 2012

Theon Greyjoy tests the power of political oratory ...

... and also the extent of his own charismatic authority.  For those of you who are not regular viewers of the HBO series "Game of Thrones" (and who also haven't read the series of novels by George R.R. Martin on which TV series is based), here's what's going on in the video clip below.  Theon Greyjoy, son of the Lord of the Iron Islands, gives an impassioned speech to inspire his outnumbered force to carry out a gloriously suicidal last stand against a much larger besieging force.  His men have been offered safe conduct home if they surrender and hand over Theon.  But that's an insult to their honor, for sure.  Dan Drezner sees an instructive political parable here... though, in fact, I think the dynamics involved here are a little more complicated (and less simply rationalist) than Drezner suggests. --Jeff Weintraub