Jonathan Chait tracks the mendacious twists and turns of Bush Administration fiscal policy:
TNR Online | Deficit Reduction (print): ...Perhaps the hardest part of criticizing the Bush administration's economic logic is simply keeping track of it from week to week. Consider President Bush's view of deficits. His initial position, while peddling his tax cut on the campaign trail and in the first months of his presidency, was that a return to deficits was inconceivable. "We can proceed with tax relief without fear of budget deficits, even if the economy softens," he said in March 2001. "The projections for the surplus in my budget are cautious and conservative." When, in the late summer and early fall of that year, budget forecasts first showed deficits on the horizon, he dismissed them as "speculative" and "guesswork." When finally forced to acknowledge the inevitability of deficits last spring, he insisted they would be "small and temporary." Meanwhile, he'd begun laying the groundwork to shift the blame away from his tax cut and onto such factors as the September 11 attacks, the recession, and big-spending Democrats. But, with the recession and the terrorist attacks now receding into the past and unified control of the government in GOP hands, deficits are still projected to remain a large and permanent feature of the Bush presidency. And so it has become necessary for the administration to retreat to yet another new line of defense: Deficits don't matter.
The turnabout is fairly remarkable. Last spring, Bush said, "I'm mindful of what overspending can mean to interest rates or expectations of interest rates." As recently as September, he argued, "For the sake of fiscal sanity, the United States Senate must ... get us to head towards a balanced budget." But, since Republicans took the Senate in November, the White House has begun arguing that it makes no macroeconomic difference whether the budget is balanced or not. The point man for this argument is R. Glenn Hubbard, the chairman of Bush's Council of Economic Advisers. Hubbard has pooh-poohed the impact of deficits before, but now his arguments are taking on a new prominence, with the White House issuing charts and graphs bolstering his case. "One can hope that the discussion will move away from the current fixation with linking budget deficits with interest rates," Hubbard declared in a December speech. When asked about deficits raising interest rates, he sneered, "That's Rubinomics, and we think it's completely wrong."
The Bushies use the phrase "Rubinomics" so often, and with such contempt, that you'd think Robert Rubin was some sort of convicted swindler rather than a widely admired Treasury secretary. The phrase refers to the strategy developed in the first year of the Clinton administration. Inheriting a still-sluggish economy, the Clintonites decided, after much internal deliberation, to concentrate on deficit reduction--on the theory that this would lower long-term interest rates and thereby help stimulate economic growth. As surpluses appeared in the late '90s, Rubin and others argued for using them to pay down the national debt rather than to cut taxes or increase spending, for essentially the same reason. The result, of course, was fairly spectacular.
Now, one can argue that the '90s boom had little to do with "Rubinomics." But the Bush administration isn't merely disputing the importance of fiscal discipline; it's denying the factual premise that deficits affect interest rates--an elementary assumption shared by liberal and conservative economists alike. Interest rates, after all, are the price of borrowing money. There is only so much money out there to be borrowed at a given price. When the government borrows hundreds of billions of dollars, the supply constricts, raising the price for everybody else. Similarly, if Washington were to purchase a large chunk of the orange harvest and throw it into the Potomac, the price of oranges would, other things being equal, rise...
Posted by DeLong at January 06, 2003 05:37 PM | Trackback
Brad, I think you credit the administration's statements about the economy with more meaning than they possess. There is no system. Bush & Co. do what they want, and say what they think will work. There's no necessary relationship between the ostensible meaning of their statements, and the policies and considerations that actually motivate them.
As I keep saying -- and I think it's very dreary of me to be so repetitive -- Bush & Co. don't believe the rest of us are players in the same game they're playing. Among other things, that means that what they say to us simply doesn't matter. They feel no obligation to give us true accounts of what's happening, or indeed to tell us about it at all. They just make economic noises.
Posted by: Teresa Nielsen Hayden on January 6, 2003 07:42 PMYes, this is a good account of the joke that is Bush's fiscal policy. But we never consider the punchline-- the one that has been there since Reagan and is about to hit all of us with accompanying raucous laughter from Delay, Nickles, Norquist, add the other names yourself:
the destruction of the domestic Federal budget, agencies eviscerated, Medicare, Medicaid, and Social Security destroyed, with little left standing except funding for U.S. nuclear belligerence abroad. The point of all unfunded mandates for homeland security is to take the state governments down too.
There is nothing incoherent about this: it is the precise, purposeful, deliberate point of all Republican actions.
Robert Bork, in his "Slouching Toward Gomorrah"
states (twice, I believe), and I paraphrase, that when he and his conservative friends discuss what circumstances would restore virtue to the American people, depression and war would be on the list if the population would stand for both.
Funny how it's turned out.
Posted by: John Thullen on January 6, 2003 07:49 PMHave you looked into haveing Ozzy Osbourne co-sponser your blog?
Posted by: Jason McCullough on January 6, 2003 10:49 PM"The Bushies use the phrase "Rubinomics" so often, and with such contempt, that you'd think Robert Rubin was some sort of convicted swindler rather than a widely admired Treasury secretary."
Is this the same Robert Rubin?:
"Citigroup stood to lose more than $1 billion that it had lent to Enron if its credit rating was downgraded and the company subsequently collapsed. Mr. Rubin had been asked to make the call by the head of Citigroup's investment banking unit at the time, Michael A. Carpenter, according to the staff report by the Senate Governmental Affairs Committee."
http://www.nationalreview.com/levin/levin.asp
Do I need to add anything more?
Posted by: David Thomson on January 7, 2003 02:25 AM“...the destruction of the domestic Federal budget, agencies eviscerated, Medicare, Medicaid, and Social Security destroyed, with little left standing except funding for U.S. nuclear belligerence abroad.”
Is this suppose to be some sort of joke? If so, you possess a bizarre sense of humor. The United States government is responsible for protecting its citizens. And guess what? There are some very evil scum bags in this world who wish to destroy us. This reminds me why the typical Democrat should not be elected to the highest office of the land. Their pervasive pacifist streak endangers us all. Thankfully, many American voters also sensed this harsh fact during the recent elections. These Democrats could get us killed.
Posted by: David Thomson on January 7, 2003 02:41 AMThullen's comment have to be the result of some psychiatric imbalance. Has Medicare been eviscerated? Has Federal tax revenues as % of GDP shown more than a marginal decline in the last decade? Reality is a powerful thing.
Posted by: JT on January 7, 2003 06:47 AMThe Bush administration, in "defense" of its terrible fiscal policies, has taken to blaming the former administration (like it does with just about all its failures). They can count on the "dittoheads" to echo the attacks, regardless of how nonsensical. For instance, using Citicorp to disparage Rubin as Treasury Sec.
I can't believe supposed conservatives are defending deficits, except to protect their beloved leader. What is the morality of piling on debt to future generations? Did these alleged conservatives call for deficits a couple of years ago, or are their "principles" ad hoc defenses of Bush?
Posted by: Rich Phillips on January 7, 2003 07:35 AMJanuary 7, 2003
An Irrelevant Proposal
By PAUL KRUGMAN - NYT
Here's how it works. Faced with a real problem — terrorism, the economy, nukes in North Korea — the Bush administration's response has nothing to do with solving that problem. Instead it exploits the issue to advance its political agenda.
Nonetheless, the faithful laud our glorious leader's wisdom. For a variety of reasons, including the desire to avoid charges of liberal bias, most reporting is carefully hedged. And the public, reading only praise or he-said-she-said discussions, never grasps the fundamental disconnect between problem and policy.
And so it goes with the administration's "stimulus" plan.
Boosting a stumbling economy ("It's Clinton's fault!" shouted the claque) isn't rocket science. All a sensible plan must do is focus on the present, not the distant future; on those who are suffering, not on those doing well; and on those who are most likely to spend additional money.
Right now a sensible plan would rush help to the long-term unemployed, whose benefits — in an act of incredible callousness — were allowed to lapse last month. It would provide immediate, large-scale aid to beleaguered state governments, which have been burdened with expensive homeland security mandates even as their revenues have plunged. Given our long-run budget problems, any tax relief would be temporary, and go largely to low- and middle-income families.
Yesterday House Democrats released a plan right out of the textbook: aid to states and the jobless, rebates to everyone. But the centerpiece of the administration's proposal is, of all things, the permanent elimination of taxes on dividends.
So instead of a temporary measure, we get a permanent tax cut. The price tag of the overall plan is a whopping $600 billion, yet less than $100 billion will arrive in the first year. The Democratic plan, with an overall price tag of only $136 billion, actually provides more short-run stimulus.
And instead of helping the needy, the Bush plan is almost ludicrously tilted toward the very, very well off. If you have stocks in a 401(k), your dividends are already tax-sheltered; this proposal gives big breaks only to people who have lots of stock outside their retirement accounts. More than half the benefits would go to people making more than $200,000 per year, a quarter to people making more than $1 million per year. ("Class warfare!" shouted the claque.)
....
Posted by: on January 7, 2003 11:51 AMThis Admninistration is intent at enriching the rich and cares not a whit for the rest....
Posted by: on January 7, 2003 12:00 PMActually, it's a budgetary imbalance, not psychiatric. I would be happy to pay more in taxes to fund the necessary protection from evil scumbags in the world. But patriotism seems to get cheaper with every new tax cut. I'll tell you what -- you fund my programs and I'll fund yours. How's that for balance?
Posted by: John Thullen on January 7, 2003 06:09 PMDavid Thomson wrote of typical Democrats, Their pervasive pacifist streak endangers us all.
You must be kidding. What was pacifist about Bill Clinton?
Most importantly, what have Republicans tried to do with the most important defense program (getting former Soviet nuclear materials decommissioned)? Gut part of it.
JT wrote, Has Medicare been eviscerated? No, but that's not because they don't want to. If you follow the intent of the crazies at all, it's clear that the program is to destroy the public sector. That's why, for example, they want to privatize the school system with voucher plans. (Now certainly there is a minority who believe in vouchers because they sincerely think it will lead to better outcomes, but...) Re Medicare, why would anyone introduce the recent proposal to modify the current fee-for-service system (which does have its own problems) so that it must "compete" with private plans, when there's no evidence this will result in any cost savings?
Just because they don't feel that they can get away with gutting the public sector overnight doesn't mean that that's not their intent. Don't you ever read their agitprop? I suggest looking into the ravings of Grover Norquist.
Best,
“David Thomson wrote of typical Democrats, Their pervasive pacifist streak endangers us all.
You must be kidding. What was pacifist about Bill Clinton?”
I give high marks to Bill Clinton for saving lives in Yugoslavia. However, he failed miserably in combatting the Muslim Fascists. Much of this had to do with the political correctness dominating the Democrat Party. Far too many Democrats are favorably inclined toward the ACLU and its fellow travelers---and this organization is one of the greatest threats to the safety of our nation. Also, didn’t the Democrat legislators choose Nancy Pelosi for their congressional leader?
“If you follow the intent of the crazies at all, it's clear that the program is to destroy the public sector. That's why, for example, they want to privatize the school system with voucher plans. (Now certainly there is a minority who believe in vouchers because they sincerely think it will lead to better outcomes, but...)”
I do indeed wish to destroy the areas of the public sector that cannot do the job as well as the private sector. And yes, the voucher plans are the best bet to improve education. I am firmly convinced that the Democrat Party is the inadvertent enemy of education because of its committed relationship with the educational labor unions. Anyone who cares about education and votes Democrat should be thoroughly ashamed of themselves.
“Re Medicare, why would anyone introduce the recent proposal to modify the current fee-for-service system (which does have its own problems) so that it must "compete" with private plans, when there's no evidence this will result in any cost savings?”
Isn’t this website devoted primarily to economic issues. If this is indeed the case, why do so many of the commentators fail to understand Economics 101? This is especially true for those who somehow even “earned” an advanced degree in economics. What in heaven’s name where these people doing during their so called years of higher education? Let me be blunt: government is inherently more incompetent than the private sector. It is downright goofy to hand over more power to government bureaucrats than is absolutely necessary. This is so patently obvious that it is absurd for anyone to claim otherwise.
Posted by: David Thomson on January 8, 2003 02:51 AMSo Mr. Thomson compliments my bizarre sense of humor in his first response, for which I thank him, and then confirms the facts of Republican intent, as I stated them, in his last response, for which I thank him.
Posted by: John Thullen on January 9, 2003 09:57 PM