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The Very Idea of A Long-term Deficit Reduction Plan

letsgetitdone's picture

This week and last we've seen the appearance of four plans for “deficit and debt reduction.” Erskine Bowles and Alan Simpson started things off by releasing their Co-Chair's plan. At about the same time, the Peterson-Pew Commission on Budget Reform issued a plan on reform of the budgetary process designed to ensure that fiscal rules organized around specific debt-to-GDP ratio targets would be implemented. These plans were quickly followed by releases from Jan Schakowsky, and Alice Rivlin and Pete Domenici, on behalf of the Bipartisan Policy Center's Debt Reduction Task Force.

The Peterson-Pew Commission Report is distinct from the other three in the sense that it lays out debt-to-GDP ratio targets and procedures for meeting these targets regardless of economic conditions. It's about constructing a disciplinary framework for budgeting and expenditures that would bind Federal spending come what may. It's neutral about where cuts would come from however, preferring to advocate an institutional framework for discipline rather than substantive spending reductions in particular areas.

The other three sets of proposals offer different mixes of spending cuts and tax reforms designed to reduce spending. Currently, policy wonks are poring over these proposals characterizing them as more or less progressive, easier or harder on the middle class, less or more advantageous to the wealthy, less or more favorable to the social safety net. None of the reports or proposals however, considers the question of whether there really is a long-term debt or deficit problem. All simply assume that there is one, and that the courageous and fiscally responsible thing to do is to bite the bullet and develop a long-term plan for managing deficit numbers and especially the debt-to-GDP ratio.

No doubt over the next few weeks we will get other proposals from other members of the Catfood Commission, or others interested in fiscal responsibility and reform who will just assume that there is a deficit, debt, or debt-to-GDP ratio problem in the United States and who believe that we need an austerity strategy of some sort to handle that problem. Before we take any of these plans seriously we really ought to require that their authors provide an answer to a few simple questions:

-- First, do you understand that a Federal Government deficit ADDS financial assets dollar-for-dollar to the non-Government, including the private, sector?

-- Second, do you understand that a Federal Government surplus SUBTRACTS financial assets from the non-Government sector?

-- Third, do you understand that any long-term program of deficit cutting will decrease the amount of additional financial assets flowing into the non-Government sector over time, barring an increase in exports at least equivalent to the reduction in the deficit cuts?

-- Fourth, if you understand these three accounting facts, then do you really think we should be adopting a long-term deficit reduction policy aimed eventually at running surpluses, regardless of developments in the economy providing the backdrop for Government fiscal policy? What if, contrary to what you now expect there is no recovery in the economy greater than we have now in 2011, 2012, 2013, 2014, 2015, etc.? Do you think that in those circumstances a long-term deficit reduction policy requiring scheduled cuts in various programs would be helpful or harmful to the financial assets of the non-Government sector?

-- Fifth, what if the mortgage foreclosure fraud mess results in another banking crisis and plunges us once again into an accelerating recession? Would it then be helpful or harmful for the financial assets of the non-Government sector if the Government were implementing a long-term deficit reduction plan?

-- Sixth, If the answers to the last two questions are harmful, then why does it make any sense to have a long-term deficit reduction plan? Would you really be willing to make the private sector poorer than it would otherwise be under worsening economic conditions by reducing the amount of the deficit or even running a surplus? That is, are you really willing to put the goal of deficit reduction ahead of the goal of recovery in a worsening economy?

-- Seventh, all of the deficit reduction plans being offered now don't schedule cuts or tax rises until some time in the future when, it is assumed, the recovery is likely to have occurred. The Schakowsky and Rivlin/Domenici plans even include stimulus measures to hasten the recovery. But what if there is no recovery? Or what if there is a brief recovery, followed by a plunge into another recession in late 2012 or 2013, or in 2015, then are you willing to go ahead with planned deficit reductions, even though people are losing their jobs left and right and deficits are rising rapidly due to the effects of the automatic stabilizers?

-- Eighth, what if your deficit reduction plan did not pass the Congress and the debt-to-GDP ratio in the United States increased from its present value to 125% in 2020? Would this mean that the Government had any less ability to continue deficit spending than it has now? Wouldn't Congress still have the same power to appropriate spending? Wouldn't the Treasury still have the same power to spend, and in the spending create money by marking up private accounts? In answering these questions please keep in mind the experience of Japan which is that it is possible for a major industrial nation with a non-convertible fiat currency system and a floating exchange rate to have a public debt-to-GDP ratio of nearly 200% and still maintain near zero interest rates for Government bonds.

-- Ninth, so, keeping all the above in mind, can you explain why it is you still think, if you do, that the US Government faces a debt, deficit, or public debt-to-GDP ratio problem, and that this problem is so serious that we need a long-term deficit reduction plan that will prevent the Government from spending enough to ADD the financial assets to the private sector needed to enable a recoveries when we experience recessions?

-- Tenth, all of you are responding to a call for fiscal responsibility and reform and are offering plans that assume that fiscal responsibility means cutting deficits, stabilizing and decreasing the level of the public debt-to-GDP ratio, and in some instances working towards and even running budget surpluses. But what makes you think that such plans are fiscally responsible?

Is a plan, that might require the Government to destroy more private financial assets than it provides fiscally responsible, when bankruptcies and foreclosures are at an all-time high and U6 unemployment is moving towards 20%?

Is such a plan fiscally responsible when we need to spend $2.5 Trillion to rebuild our infrastructure?

Is such a plan fiscally responsible when we need to re-build our energy foundations and our educational system, or when there other great public and private needs?

These questions should focus you on the more general question of what is fiscal responsibility anyway?

It should also focus you on the even more important question of whether the very idea of a long-term deficit reduction plan is really fiscally responsible?

It may be responsible, if you define fiscal responsibility as following particular budget rules targeting levels of Government deficits, debts, and public debt-to-GDP ratios. But if you define it, instead, in terms of the relative effectiveness of Government spending in fulfilling the public purposes of the people of the United States, then you'll soon become convinced that a long-term deficit reduction plan implemented prioritized ahead of more significant public purposes such as unemployment, health care for all, education, and other important needs of people is about as fiscally irresponsible as economic plans can get.

In the year 1984, I wasn't sure that we had yet reached 1984. But in the year 2010, we are increasingly reaching the time when the names given to Governmental policies actually mean the opposite. So, health care reform actually means insurance company bailout, and credit card reform actually means giving the credit card companies an excuse to raise their customers average interest rates by 50%. And now, fiscal responsibility and reform means fiscal irresponsibility, austerity, and the abdication of Government responsibility for the social safety net that gives many Americans a decent life.

To those contributing to this kind of doublethink, my final message is that the very idea of a long-term deficit reduction is pernicious, anti-democratic and fiscally irresponsible, since it will result in an unprecedented decline in the wealth and well-being of working Americans and the destruction of the American middle class.

And to so-called progressives like Jan Schakowsky, I say stop participating in this charade. The very idea is a corruption of our democracy by a plutocratic elite trying to undermine Government economic activism to protect their own previously gained wealth, and you and other progressives on the Commission, if you have a shred of honor and integrity left ought to resign in protest over it.

(Cross-posted at All Life Is Problem Solving and Fiscal Sustainability).

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beowulf's picture
Submitted by beowulf on

And last week, there a sed spoof political spots to market the dangers of deficit spending to a younger generation. Except Jan Schakowsky's "off-message" deficit dove plan, we have four similar plans with only minor marketing, structural and policy differences (curiously nothing that would impact Wall Street plutocrats--- higher rat. And all four were funded by one Peter G. Peterson.

The timing wasn't a coincidence, and it explains why Bowles and Simpson rushed out a draft commission report before letting the other commission even look at it.. This whole drrumbeat of deficit hysteria the last week or so appears to be a marketing effort by Pete Peterson's and his hired hands (including, apparently, the Presidents) to market Peterson's deficit hysteria message through different promotional channels.

letsgetitdone's picture
Submitted by letsgetitdone on

Pete's behind it all. He's penetrated both parties. the foundations, The Administration. WaPo and CNN. He's the man.

Submitted by MontanaMaven on

Urg! Alan Simpson makes me throw up in my mouth. His smugness is unbearable. And Bowles has his own creepiness aspect, but nothing like the condescension of Simpson.
They are all worried about their grand children. Yeh well read "Collapse" you nitwits. Your grandchildren may have money, but they will be unable to breath fresh air or drink fresh water. The seas will be filled with more floating garbage islands. And deranged hungry people will be pulling them out of their Mercedes. What a lovely future, you morons.

letsgetitdone's picture
Submitted by letsgetitdone on

That's probably the trouble, mm, they're worried about their Grandchildren, but not ours. To provide for our Grandchildren, we need to keep working and we need to have an economy that keeps growing. The amount of "debt" in the public sector corresponds to additions to financial assets in the private sector. So, as long as there's no inflation, the more Federal debt or at least Federal deficits we have, the better off we and our Grandchildren are, provided of course that the public funds don't go to the banks or the wealthy.

Submitted by Hugh on

Don't know about the others but you can google for stories on Pete Peterson providing staffing to the Bowles-Simpson Commission. Then there was the February 23, 2009 Fiscal Responsibility Conference. Pete Peterson was behind that and was supposed to speak at it, but then got pulled at the last minute because of pushback:

The link is kind of interesting because it shows how the awareness of the connections was still developing. It misses Orszag's (OMB director) ties to Peterson through the Hamilton Project, and, of course, Rubin, one of its co-founders

BTW here is another link with some background:

You can see how the Cat Food Commission ideas for cutting Social Security were there even then.

Also BTW Jack Lew the acting director of OMB used to be on the Hamilton Project board per wiki.

If you are looking for a Peterson tie-in, Alice Rivlin is also on the Hamilton Project board. In fact, you can see the whole board here:

makes for interesting reading. As for the Bipartisan Policy Center which sponsored the Domenici-Rivlin panel, here is its board:

a bigger bunch of corporatist hacks you are unlikely to find.

beowulf's picture
Submitted by beowulf on

Rivlin-Domenici Task Force

Partial Medicare privatization through premium support isn’t the only major change to the senior health care program contained in the Rivlin-Domenici proposal, which was sponsored in part by the Peter G. Peterson Foundation, which also provides financial support for The Fiscal Times.

Oweno campaign

The Peter G. Peterson Foundation (PGPF) today launched “OweNo,” a nationwide engagement and advertising campaign to engage Americans in a movement to address the nation’s long-term fiscal challenges.$6-Million-National-Public%20Engagement-and-Advertising-Campaign.aspx

Pew-Peterson Commission

To modernize an outdated Congressional budget process in light of the daunting economic challenges facing the nation, the Peter G. Peterson Foundation, The Pew Charitable Trusts and the Committee for a Responsible Federal Budget have launched a landmark partnership to build bipartisan consensus for a core set of reforms.

President's Catfood Commission

But the National Commission on Fiscal Responsibility and Reform has also come under attack for its unusual approach to staffing: Many of its employees aren't employed by the panel at all.
Instead, about one in four commission staffers is paid by outside entities, many of which have strong ideological points of view about how to tackle the deficit.

For example, the salaries of two senior staffers, Marc Goldwein and Ed Lorenzen, are paid by private groups that have previously advocated cuts to entitlement programs. Lorenzen is paid by the Peter G. Peterson Foundation, while Goldwein is paid by the Committee for a Responsible Federal Budget, which is also partly funded by the Peterson group.

letsgetitdone's picture
Submitted by letsgetitdone on

on a roll tonight, beowulf. Thanks for enriching the context.

Submitted by lambert on

So, this is worth a post, no? The headline might be something like:

"Shocker: Four supposedly independent deficit proposals are funded by Pete Peterson"

How about Scharkowski?

Submitted by jawbone on

Schakowsky and Dean Baker. Without her having intro'd her alternative to Simpson-Bowles, they would not have appeared -- two whole liberals! On Charlie Rose! But only for half the program, as opposed to Bowles and Simpson being on for the entire hour. That was Simpson's fourth appearance, Bowles third, and firsts for both Schakowsky and Baker.

That was astonioshing about Baker -- that he has never been on the Charlie Rose program prior to last night!! But Charlie is the epitome of the MCMers toeing the line for the corporatists and Versailles courtiers.

I caught the very tail end of Schakowsky and Baker's time and figured I could just watch the video later. Well, I went to the Rose web site, and it appears the show is not available until after repeats, which would be Monday for this program. Simpson/Bowles is up, with transcript. I couldn't watch that program live: too disturbing late at night.

Schakowsky speaks very well -- no um's, er's, and long pauses, fluent, organized, able to recognize point of questions, make her points. Impressive. Mostly I only heard Baker say good-night, but I have heard him before. (Why did people ever think Obama spoke well? Did BushBoy lower the bar so very much?)

Schakowsky seems pretty impressive, from what I've heard and seen (but that's not very much, just references to her in other blogs). Definitely liberal. Too bad she's in such a minority on the Obama-Pete Peterson Cat Food Commission.

I'm sure Obama will try to play the "good cop" vs. Simpson-Bowles "bad cops." I wonder if he'll get away with it. And will the MCM ever focus on all the Peterson tentacles in this thing???

Thanks to all who have provided links for all those tentacles.

The comments to the S-B show are interesting.

letsgetitdone's picture
Submitted by letsgetitdone on

She's close to Obama, a friend and supporter. Followed the Part Line on hcr, all the way. Also, close to Durbin. Yes, she's liberal. But she won't go against her friends and supporters unless it doesn't matter. Durbin may be the swing here. If Durbin can't stomach the SS cuts, then Schakowsky would have conflicting loyalties, and cold line up with Durbin. Rahm's return to Illinois might make things more difficult for her, because she's going to want his support when she one day makes run for Gov. or the Senate.

Submitted by jawbone on

the Simpson-Bowles or Domenici-Rivlin recommendations, besides Schakowsky?
Who indeed?

When the Cat Food Commission is described as "stacked" in favor of cuts, it's almost an understatement. All due to Obama, our very own Hoover Redux DINO prez.

ERSKINE BOWLES, co-chairman [Rightward Corporatist DINO Stackee from Obama]

Bowles, the president of the University of North Carolina since 2006, started his business career at Morgan Stanley in New York and later founded an investment banking firm.

Former President Bill Clinton named him to lead the Small Business Administration in 1993, and Bowles became the president's chief of staff from 1996 to 1998. In that position, he helped negotiate the Balanced Budget Act of 1997 with Republican congressional leaders, producing the first balanced U.S. budget in nearly 30 years.

ALAN SIMPSON, co-chairman [Extremely rightwad, very crazy stackee from Obama]

Simpson was the No. 2 Republican in the Senate for a decade. His chief legacy in the Senate was the overhaul of U.S. immigration law that was signed by President Ronald Reagan in 1986 after intense lobbying by special interest groups.

Simpson was also known as a strong voice for fiscal balance, voting in favor of the 1990 bipartisan deficit reduction agreement, a U.S. official said.


DAVID COTE [Corporatist rightward stackee from Obama]

Cote, a Republican, has served as Honeywell International chairman, chief executive and president since 2002. He is a member of the U.S.-India CEO Forum, which Obama asked him to co-chair in 2009. He adds a business perspective to Obama's slate of representatives on the panel.

ALICE RIVLIN [Corporatist Dem rightish stackee, been after cuts to SocSec for a long time, from Obama]

Rivlin is a former Federal Reserve vice chair who was also budget director under Bill Clinton. She was the founding director of the nonpartisan Congressional Budget Office from 1975 to 1983. Now a senior fellow at the Brookings Institution, she would bring budget savvy to the panel.

ANN FUDGE [I don't know her, but her bio says Rightward Corporatist stackee -- from Obama, of course]

Fudge worked as chairman and chief executive of Young & Rubicam Brands from 2003 to 2006. She previously held executive positions at General Mills and Kraft. Fudge would bring business experience to the budget panel.

ANDREW STERN [Sucking up DLC-type stackee, has to make his bones as Very Srious Person (VSP), from Obama]

Stern is president of the Service Employees International Union, which covers 2.2 million workers such as healthcare staffers, security officers and public employees. Stern would bring a labor perspective to the panel. (Uh huh. And uh oh.]


SENATOR RICHARD DURBIN [What will the senior senator from IL do???]

Durbin, the No. 2 Democrat in the Senate, is a liberal from Illinois who could be expected to oppose proposals to reduce the yawning U.S. deficit by cuts in programs like Social Security, the U.S. government retirement program.

SENATOR KENT CONRAD [Dem deficit hawk extraordinaire -- appt'd by Reid]

Budget Committee Chairman Conrad, from North Dakota, is a fiscally conservative Democrat who has advocated some cuts to entitlement programs along with some tax hikes to close the deficit.

SENATOR MAX BAUCUS [Another Dem deficit, Corporatist lackey -- appt'd by Reid]

Baucus, the Finance Committee chairman, is a moderate Montana Democrat who worked for months in vain to try to forge bipartisan healthcare legislation with Republicans. He has called for tax reform and cuts in entitlements to balance the budget.


SENATOR JUDD GREGG [Repub - supposed moderate NE version]

Gregg, from New Hampshire, is the top Republican on the Senate Budget Committee. Obama once nominated Gregg to be commerce secretary, but Gregg withdrew from that appointment, saying he did not support Obama's economic stimulus package.

SENATOR TOM COBURN [Crazy rightwad Repub]

A medical doctor and critic of Obama's recent healthcare overhaul, the Oklahoma Republican crusades against earmarks, the pet projects that lawmakers tuck into spending bills. Coburn calls them the "gateway drug to spending addiction."

SENATOR MIKE CRAPO [Another crazy rightwad Repub]

An Idaho Republican, Crapo is a member of the banking, budget and finance committees. Along with Senator Charles Schumer, Crapo has been trying -- so far unsuccessfully -- to develop bipartisan proposals for executive pay and shareholder rights as part of financial regulation reform.


REPRESENTATIVE JOHN SPRATT [Deficit hawk Dem, lost seat; what will he do??]

The Democrat from South Carolina is chairman of the House Budget Committee and participated in Balanced Budget Act negotiations in 1997 that helped put the budget into surplus. Spratt emphasized the need to find common ground to put the country back on solid fiscal footing.

REPRESENTATIVE XAVIER BECERRA [I don't know about him -- anyone?]

From California, Becerra serves as vice chairman of the House Democratic Caucus and sits on the tax-writing House Ways and Means Committee. He said it will be necessary to make tough choices "to build a prosperous, debt-free future for our children."

REPRESENTATIVE JAN SCHAKOWSKY [Liberal Dem, but being forced to play on the Obama-Pete Peterson home field]

The Illinois Democrat is a member of the Energy and Commerce Committee. She is said to be a leading voice in favor of protecting health and retirement security for seniors and to protect the Social Security retirement and Medicare health program for seniors.


REPRESENTATIVE PAUL RYAN [FSM HELP US! Attractive crazy rightwad Repub]

Ryan, from Wisconsin, is the ranking Republican on the Budget Committee. He recently proposed a long-term plan for deficit reduction that eventually would put the United States in the black without raising taxes. It would do this by cutting programs like Medicare, the U.S. government's health insurance program for the elderly and disabled.


Hensarling, from Texas, is a member of the budget and financial services committees who pushed for the House Republicans' recent one-year moratorium on earmarks. He has proposed capping federal spending at 20 percent of the U.S. economy every year.

REPRESENTATIVE DAVE CAMP [Crazy rightwad Repub who wants to make the US into Greece]

Camp, from Michigan, is the top Republican on the House Ways and Means Committee. He contends the U.S. budget should be balanced without raising taxes, and favors passing an amendment to the U.S. Constitution requiring a balanced budget.

Which Dems on the Cat Food Commission will try to forestall the death of the Democratic Party?

letsgetitdone's picture
Submitted by letsgetitdone on

I don't think they'll get this through the Lame Duck, no matter how they vote on the Commission. Also, when the new Congress comes around, the Republicans won't have any stomach for the tax hike aspects of it, and the Dems will soon realize that they have no hope of taking back the House if they back the President on this one.

I might be surprised, but when the polling on public opposition to SS and Medicare spending cuts sinks in, I don't think anyone will back Obama on this one. Why should the Republicans back him and give him a victory? Why should the Dems listen to him, when he's just led them to a horrendous defeat by alienating their base?

CMike's picture
Submitted by CMike on

Are the financial assets the non-government sector ends up owning as a result of government deficits distributed equally among all Americans or are there some Americans and foreigners who end up with a disproportionate share of those assets? Can those financial assets eventually be used, by those who own them, to consume or profit from the finite amount of goods and services that the economy will produce in the future? Do you expect tax policy in the future to be as fair as it is now? Will substantially increasing the national debt over the next three to five years, say by 25%, guarantee full employment thereafter or might there remain a need to continue to grow the size of the debt in the years after that?

If GDP growth stalls, what would be the consequence of that in regards to the debt burden and might GDP growth stall if, say, there were to be an interruption of oil supplies for several years due to political turmoil in an oil rich region or were there to be a dramatic rise in oil costs due to unavoidable market forces related to peak oil issues?

Unless we're willing to argue explicitly for the redistribution of wealth within our society, I don't think increasing the national debt will prove to be of much use to us in the long term.

letsgetitdone's picture
Submitted by letsgetitdone on

Are the financial assets the non-government sector ends up owning as a result of government deficits distributed equally among all Americans or are there some Americans and foreigners who end up with a disproportionate share of those assets?

No, It depends on who's targeted by the deficit spending. Also, the multiplier from spending varies widely. Tax cuts for the wealthy have a multiplier of 0.29. The multiplier for unemployment insurance is 1.69 or something like that, one of the highest in spending categories. Foreigners also may end up with dollar assets if Americans spend on imported goods after getting Federal payments.

Can those financial assets eventually be used, by those who own them, to consume or profit from the finite amount of goods and services that the economy will produce in the future?

The can be used to consume or profit from both goods and services available now and goods and services yet to be made available if they save the assets. Also, even though future goods and services are finite, they are likely to be more plentiful in the future than now unless we ruin our economy through austerity, which unfortunately we seem to be inclined to do.

Do you expect tax policy in the future to be as fair as it is now?

Can't tell. You're asking me to project the outcome of political conflict, an even harder task than economic projection. However, there are hopeful signs that the issue of the mal-distribution of wealth is beginning to dawn on people, so perhaps progressive taxation will become popular again.

Will substantially increasing the national debt over the next three to five years, say by 25%, guarantee full employment thereafter or might there remain a need to continue to grow the size of the debt in the years after that?

There is no need for debt. There is only a need for deficit spending. If you're asking whether the cumulated deficit will substantially increase over the next 3-5 years, I think the answer is that it may. It depends on how long it takes us to realize that there are good deficits that we use to make the economy healthy, or bad deficits forced upon us because we mistakenly try to cut spending and end up with an economy that spirals downward.

If GDP growth stalls, what would be the consequence of that in regards to the debt burden and might GDP growth stall if, say, there were to be an interruption of oil supplies for several years due to political turmoil in an oil rich region or were there to be a dramatic rise in oil costs due to unavoidable market forces related to peak oil issues?

If GDP growth stalls, the debt-to-GDP ratio will rise. In fact, CBO projections assume historically slow growth, which is part of the reason why they are showing a debt crisis. If oil supplies are cut off, this could lead to GDP decline or growth. Much depends on how the Government responds. If we respond with oil rationing and price controls, and emergency Government spending programs to replace oil as an energy source GDP could rise dramatically.

Unless we're willing to argue explicitly for the redistribution of wealth within our society, I don't think increasing the national debt will prove to be of much use to us in the long term.

Well, again, I'm for getting rid of that national debt. People are irrational about it, and it provides welfare for the rich and foreigners. As for increasing deficit spending, it will be of great use to us if we spend on the right things, like new energy foundations, infrastructure, education, guaranteed jobs, climate control, environmental protection. There's so much we have to do in this country. Of course, high multiplier deficit spending will help us.

At some point the private sector will see demand out there, and it will respond with renewed activity. When it does and we reach full employment, there will then be danger of inflation. At that point, it will be time to tax more, and it is then that the taxes should be really progressive, so that we begin to right the mal-distribution of wealth that's occurred over the past 30 years.

What are the chances of all this happening. Slim and none until we can really re-orient the political system. We tried with Obama, but he turned out to be a Hoover rather than an FDR. If we can get our FDR next and good majorities in Congress, then we can spend and spend, tax and tax, and elect and elect our way to a more democratic and happier society.

Submitted by hipparchia on

At some point the private sector will see demand out there, and it will respond with renewed activity. When it does and we reach full employment, there will then be danger of inflation. At that point, it will be time to tax more, and it is then that the taxes should be really progressive, so that we begin to right the mal-distribution of wealth that's occurred over the past 30 years.

tax the rich and and the corporations NOW - they sucked all the money out of the real economy and when they're not speculating with it, they're just sitting on it.

CMike's picture
Submitted by CMike on

I posted below without seeing your comment. You're exactly right.

Submitted by lambert on


Because the oligarchy’s overall goal is to crush wages and benefits, both to pay for their bailouts and as a permanent, long-running goal. They do not really believe that domestic consumer demand is necessary to their own prosperity, and prefer workers who are in permanent debt-slavery. For a generation and a half now they have made most of their money through leveraged financial games, asset bubbles and by offshoring and outsourcing jobs. American workers are nothing to them, less than nothing.

CMike's picture
Submitted by CMike on

Given the global population, pollution, and resource issues we face, I don't think we can count on the same economic growth rate going forward that we have experienced since WWII even if we start making the right choices.

Deficits seem inevitably to lead to greater inequality in society. Therefore I think inequality should be the issue, not how to get back on the road to serfdom we've been on for thirty years.

Submitted by lambert on

but the social relations that sustain them, I would say. (Crudely put, but it's late...)

letsgetitdone's picture
Submitted by letsgetitdone on

I don't think that holds up historically. FDR's deficits led to greater equality, not greater inequality. And, generally, when the Democratic Party worried more about full employment than deficits, and also adhered to a strong regulatory program, the result was greater equality. The trend toward inequality started in the 1970s and has to do with neo-liberalism and the decline of regulation, as well as Republican campaigns against the social safety net and Democratic willingness to compromise on that, because many Democrats had internalized neo-liberal ideology.

What happened was that the Republicans ran deficits and used them to benefit the wealthy and then the Democrats from Carter on wouldn't run deficits to protect the poor and the middle class. Carter did his best to balance the silly budget and ruined his Presidency because of it, and Clinton ruined his too from where I sit. I know Clinton's economy looked good from a middle-class viewpoint, but it was all based on Greenspan's debt bubbles. Since the crash of 2008 we see the real reality middle-class gains were not based on savings generated by increased income. They were paper gains, wholly due to inflated real estate. Clinton's surpluses drained wealth from the private sector and caused the recession of 200-2001, and his Presidency did very little to reduce inequality. Bush 43 then restored the Reagan pattern, but even worse, since Reagan had higher taxes.

Anyway, I agree with you that we have to target inequality, but deficits, in general, are good. We just have to make sure the assets placed into the private sector benefit the poor and middle class.