Tony Spina: “From my perspective neither Party gets it. The national debt of the United States has gone up every year since 1957. No exceptions. No ‘surpluses as far as the eye can see’ – in fact not one single surplus from any President since 1956! Republicans and Democrats are of course both well represented in those 50+ years. My conclusion: the two major Parties are not ‘good Party or bad Party’ for this Country, lately both are bad. Each spending Bill that passed since 1957 had to have been judged as essential at the time, or (I would like to think, anyway) would not have passed. Crises do occur, but can it be that in over 50 years there was not a single year without a critical need for spending more than the government took in? Prior to 1957 the national debt got paid down occasionally. A great many people will listen to an old or new political party that convincingly addresses this, I believe.”
☞ I share your frustration and know it comes from a good place, but it may be a bit offbase. In the first place, all that matters is the size of the debt relative to the economy as a whole. If the debt is relatively small – like a $175,000 mortgage on a $2 million home owned by a billionaire – it’s not a big concern. If it’s large – like the same $175,000 mortgage on a $160,000 home owned by short-order cook – it can be devastating.
So imagine we ran a $200 billion deficit each of the next 100 years, while our economy grew at 5% a year – half from real growth, half from inflation. Terrible, no? A century of $200 billion deficits!
Actually, that scenario would be wonderful. A century from now, the debt would have grown by another $20 trillion and be closing in on $35 trillion. But the GDP would have grown to $1.9 quadrillion. So the debt would have shrunk from today’s ratio of nearly 100% of GDP to less than 2% of GDP.
All this is fanciful, to be sure, but illustrates the point. Deficits are okay, so long as the overall debt is – at least in most years – growing slower than the economy.
Another piece of this is the way the accounting is done. The government does its accounting on a cash basis. All would agree that when we borrow to issue unemployment checks that’s money we are spending; but most would agree that when we borrow to build the Interstate Highway System, that’s investing. It’s not terrible to borrow money to make a productive investment. Well-managed business do it all the time.
Sometimes, a crisis comes along that requires not just relatively minor deficits, but enormous ones – like winning World War II. What choice did we have? We had to do whatever it took to win. And in so doing, we took the National Debt – which had been roughly 30% of GDP at the start of the Depression and had risen to roughly 40% by the time we entered the war – all the way up to 121% by 1946. And then, over 35 years that ended with Ronald Reagan’s inauguration, we gradually shrank it back down to 30%. Not, as you correctly note, by paying it down; just by having it grow a lot more slowly than the economy.
Reagan/Bush shot the debt ratio skyward.
Clinton inherited a stalled economy but put the brakes on spending. (At least one prominent liberal resigned in protest that bond-holder interests had been put ahead of poverty programs.*) And he worked with a Democratic Congress that in 1990 had established a system called “PAYGO” that required new budget items be paid for with commensurate cuts elsewhere or new tax revenue.
When the Republicans took back control of Congress, they ditched PAYGO.
This year, the Democrats reinstated it, over unanimous opposition from Senate Republicans (who also filibustered to kill legislation that would have created the Bipartisan Deficit Reduction Commission that President Obama went on to establish anyway, by executive order).
When Democrats are in power, Republicans call loudly for passage of the “Balanced Budget Amendment” to the Constitution. (A bad idea.) Then they take power, go silent on the issue, and run up trillions in debt. Once they lose power, they start calling for it again, as they have begun to now.
There is a pattern here.
I would never argue that Democrats are uniformly and always perfect on this issue (or any other), or that Republicans are uniformly and always wrong. But to suggest there are not huge differences between the parties – to tar them both with the same brush – is to miss some very deeply ingrained themes.
As to the “surpluses as far as the eye can see,” a couple more points. First, even though I have myself railed against doing it this way, the budget is generally expressed by both parties as if the Social Security surplus is “revenue.” Miscounting it this way did indeed give us surpluses in each of Clinton’s last two years. (But because it was not really revenue – rather, money borrowed from the Social Security Trust Fund – the debt did go up even when there was reportedly a significant surplus.)
Indeed, recognizing this, Clinton left office urging his successor (and anyone else who would listen) to “save Social Security first.” It was his way of saying, “don’t blow this reported surplus on tax cuts – we need it to shore up the national balance sheet.”
Bush, by contrast, told anyone who would listen that the surpluses were large and real. Indeed, there were prominent Republicans who publicly worried that the surpluses Clinton was handing them were so large that they threatened to pay off the entire National Debt, which would kill the important global market for U.S. Treasury securities – a worrisome prospect.
Bush said, the surplus is your money, not the government’s. Elect me, and I’ll give it back to you.
But what he really did was borrow the Social Security surplus – paid in by average working stiffs – and pay it out in the form of tax cuts that most benefited millionaires and billionaires.
There is a lot to be angry about in our current economic straits. Only a small share of that anger should be directed at Democrats.
Where Reagan slashed taxes for the wealthy and raised them for Joe the Plumber, Obama has done the reverse. He has cut taxes for 95% of working families, including Joe, but plans to raise them for the best off.
Even though I’m in the fortunate 5% or so who will pay more, I think it’s the right approach for our current circumstance. That it’s made Joe so angry is a testament to the skills and resources of the folks who hope to misinform and manipulate him into supporting Republicans who will put corporate interests and the interests of the wealthy ahead of his own.
It worked in 2000 and 2004. We’ll know in 70 days whether it worked again in 2010.
* A budget that got not a single Republican vote, and became the subject of Bob Woodward’s book, The Agenda.
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We're not trying to outsmart the smart guys. We're trying to sell bonds to the dumb guys.~alleged remark of the head of a Wall Street mortgage-bond group
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