Once upon a time, there was a President. He was elected in the middle of a recession, following an economic crisis and a decade long bear market. He came into office on high flying oratory, but was regarded by many as a lightweight.

Once in office, he passed a variety of legislation over the objections of a hostile opposing party. The pundits and the thinktanks derided his big spending, his tax cuts, and his reorganization of government. He had very different priorities than the prior president, and tried to put his stamp on government in a variety of reprioritizations.

The President had barely been in office for 18 months when the pushback to his agenda became fierce. The media and the opposing political party all focused on the budget deficit. Most of it had been accrued long before this President came into the office, but that did not stop him from getting the full blunt of the blame. “We must stop this fiscal profligacy, or it will be the end of us!” the critics all cried.

But the president ignored the critics, and put forth a deficit laden budget that contained a massive stimulus and tax cuts. He even joked about the debt issue: “I am not worried about the deficit. It is big enough to take care of itself.

By the second year of his presidency, the stimulative effects of the deficit had their impact. Unemployment began to come down, incomes went up, and the stock market roared ahead.

By now, it should be obvious that we are not discussing President Barack Obama, but rather the 40th President of the United States, Ronald Reagan.

Which raises an interesting question: We seem to be overrun with Austerians, newly minted deficit chickenhawks who recently have discovered the evils of deficit spending.

What would all of these deficit foes have said to Ronald Reagan during the first 2 years of his Presidency?  Mr. President, we cannot spend more than we take in? Mr. President, we cannot afford those tax cuts — or to spend so much on the military?

The current president, who obviously has very different priorities than RR, is in many ways following his path: Huge deficits, tax cuts targeted to his electoral base, allowing policiies of his predecessor to expire.

I find it terribly amusing that some conservatives have latched onto the deficit as their key issue, when they took the idea of deficit spending to great new heights! Whether you are looking at the economic policies of Ronald Reagan or George W. Bush, reining in the deficit was clearly of no concern. (Forget speechifying, I refer to actual policies).

~~~

I continue to see the Austerian movement in the United States as thinly disguised partisan politics. These are people who will say anything to keep the subsidies and tax benefits flowing to their electoral base. They will say anything –regardless of whether they actually believe these things — to thwart the opposing fellows priorities.

Anyone who believes the new deficit fighters care about deficits has not been paying attention. This is simply about power and money and legislative priorities and cash. With only a very few exceptions, it has nothing to do actual fiscal priorities and debt loads and deficits.

The vast majority of these new deficit chickenhawks — who voted for unfunded entitlement program (prescription drugs), who gave away trillions in unfunded tax cuts, who voted for a trillion dollar war of choice, are simply not to be believed. Their past actions speak far louder than anything they might say today.

>


Previously:

Deficit Hawks Want New (or double dip) Recession (February 17th, 2010)

Greenspan Says “Deficit Reduction A Priority” — Hence, You Know its Not (June 21st, 2010)

Word Origins: “Austerians” (June 28th, 2010)

Austerians vs Keynesians: NYT Edition (June 30th, 2010)

Proposal: Stimulus & Deficit Reduction (July 4th, 2010)

Category: Economy, Politics, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

116 Responses to “Deficit Chicken Hawks vs Ronald Reagan”

  1. The issue I am raising here is not politics but hypocrisy.

    Are the new deficit hawks legit, or is this merely partisan politics as usual ?

  2. alpha_bet says:

    I think this is a great post and I am very much in the “partisan politics as usual” camp. I feel that a lot of these newfound deficit hawks should read up a bit on history, and that does not just include Weimar Germany and Zimbabwe as I am so sick and tired of those comparisons.

  3. JustinTheSkeptic says:

    Of course it is partisan politics at its best. But can our system, no matter what party is in control, keep spending and spending? I believe Rome got in trouble doing that.

  4. xynz says:

    Chickenhawks have always embraced wars they don’t have to fight. But these hypocrites have been selective in their embrace of fiscal austerity. This selectivity means they’re not quite like chickenhawks. Instead, this selective display of plumage means they’re “deficit peacocks”.

  5. rktbrkr says:

    8 years of record deficits were met with deafening silence but the 9th was different!

    I guess it takes a Clinton to manage the federal budget!

  6. quints says:

    Excellent, undeniable observation. Yet let me add that the Democrats and Republicans are both partisans and neither of these parties (two sides of the same coin in my view) represent the people. The people I meet want fairness and efficiency from the federal government. We also want them to stay within the bounds set by the constitution.

    Where is the party that supports any these ideals? We really don’t want or need the federal government to be our mommy and fix everything and make life perfect. We don’t need extra programs or wars of choice, or bailouts of car companies and insurers.

    Believe it or not, there are a lot of people who actually want their success or failure to have more to do with their own initiative than some great federal program.

  7. krice2001 says:

    “Anyone who believes the new deficit fighters care about deficits has not been paying attention. This is simply about power and money and legislative priorities and cash.”

    Barry, as you usually do, you nailed it. I’ve been listening increduously to these newly minted deficit hawks. The only thing that really suprises me is that some people actually believe they mean what they say. As some have said, deficits only matter when the guy from the other party is in the White House. It would be more amusing if it weren’t the country’s direction that was at stake, I guess…

    I see the political parties as mostly involved in stoking their voting bases and trying to thwart anything the other party tries to accomplish. I guess it’s human nature (we’re pack animals after all and therefore “tribal”) and in the aggregate it seems to work on at least one level as the rhetoric and stonewalling from one side or the other seems to be good enough to turn things around for that party at some point, until the same is done back to them. Not that there aren’t many in policital positions who are in it with good intentions, but it seems that most or at least a critical mass get co-opted at some point.

  8. KidDynamite says:

    well, hypocrisy is never legit – but that doesn’t mean that this time around it’s the same as it was under Reagan! obviously, debt levels are vastly different now, as are interest rates – and monetary policy options available

  9. Detroit Dan says:

    Excellent point, Barry. I agree 100%, and that is one reason why I’m bearish on the economy and stock market. Government spending rescued from a repeat of the Great Depression, but it hasn’t been enough, or properly focused, to restore economic health. Austerity measures will fulfill Republican objectives — i.e. discredit the Dems — but will only cause more economic misery…

  10. d4winds says:

    Excellent post. But there is an important political difference: RR faced “a hostile opposing party” but not one that used the filibuster to try to block even a vote on almost all of his legislative agenda including legislative agendas proposed by that same party, not to mention administrative and judicial appointments. RR’s hostile party was not one of saints, but the filibuster use since the 2006 (not a typo) elections has been both staggering and historically unprecedented. Control over national affairs through this artifice by former Confederate and border states even exceeds the pre-Civil-War levels. This difference between RR & BO has enormous consequences since it shifts all political debate, consensus-making, media attention, & political power not to the median voter celebrated by political scientists or even to the 40 percentile voter nominally represented at the filibuster cloture invocation level but to the 30-35% percentile voter who is over-represented by state-weighting rather than voter-weighting in determination of that level.

  11. Kort says:

    To some people, Reagan feels like yesterday. To most, however, it’s been 30 years since he got elected–more than a lifetime to many, especially in the “like, omg, Lady Gaga is so like, last year” crowd. Hell, Nirvana’s nirvana was 20 years ago and I wonder sometime how time flies.

    So, it’s OK to discuss Reagan in parable form and it’s even OK to discuss “wars of choice”, but what happened 30 years ago or even September 12+ 2001, is irrelevant when facing a problem, today. That was then. Those are all sunk costs. Sunk arguments.

    What we have, today, are Issues. And issues require decisions made today. There’s not 1 decision that can be made, today, that can undo what happened 9 Septembers ago (or the wars that followed), or 30 years ago, or bring Kurt Cobain back. Our issues today are huge costs and, unfortunately, not enough revenues. Costs will have to be reduced and taxes will have to go up.

    We need people who understand this and will fix it. If want to name call or reference 30 years ago (when some of these people were 10 years old????), then have it.

  12. litw3030 says:

    Agree, deficit chickenhawks is mostly partison politics. As a rule, politicians can be defined by their ability to take any issue and find ways to extract advantage regardless of the cost to others and sometimes the nation. No doubt why Congress has such low approval ratings.

    Here, kidDynamite is right — the context of our times should influence our thinking: First, distinguish between deficit (year to year budget shortfall) and debt (accumulated amount owed). If you believe that large government stimulus spending is the foundation for economic growth, then current level of deficit and debt are just temporary features on the way to a robust economy. Conversely, if you think that tax cuts produce growth, then the current debt / deficit combination in the face of expiring tax cuts is prelude to a second recession.

  13. wally says:

    The big issue, to me, is not what happens now that we are in a slowdown, but what happens when times are good. When you run deficits in that circumstance, you poison the well for the bad times.
    That’s why today is not a straight comparison to then. Today, the political flexibility for stimulative policy is gone, thanks to the bone-headedness that preceded these times.

  14. Ben says:

    I hear you that politicians are hypocrites. No arguments on that front.

    I think whether you believe the other side is being kosher or not, the policies being followed today seem to be reaching a new height of absurdity. The deficits, as a percentage of GDP and as an absolute number, are certainly much higher. And from an economic standpoint the decline of the savings rate among the American public makes deficit spending less sustainable now than it was then. (http://paul.kedrosky.com/archives/2010/07/chancellor_on_s.html) I’ve read you say before that Obama’s economic policies are just an extension of the Bush policies. Certainly seems like the path we’re headed down is unsustainable and we look more like a Latin American country from the 1980s than is comfortable.

    So while your argument rings true on politicians, that doesn’t mean Obama’s policies are smart or good. Maybe Regan’s policies weren’t too good either – look at the path they sent us down.

  15. Matt SF says:

    BR

    Please make an appearance on CNBC to close the hypocritical debt hawk argument once and for all.

    If I’ve heard the “we need to reduce spending and national debt” argument once, I’ve heard it a few thousand times in 2010 alone. It’s become the de facto talking point, and someone with your status needs to illuminate what they obviously don’t know (or repressed for plausible deniability).

  16. Hacksaw says:

    Barry –
    On the surface there’s no denying that both president’s ran serious deficits and dealt with strong opposition from the opposing party, but I think it’s on the spending side that your position is flawed. Do you really think the Reagan tax cuts and the economic policies of the current administration are mirror images eachother? I see Reagan’s tax cuts as a means of allowing the private sector to dictate the growth of the American economy, which the Obama stimulus was a failed attempt for government to do it for us.

  17. JSchmid says:

    You are right the deficit hawks worry about power. Over the last two decades our government has proven itself incapable of spending the taxpayers money in accordance to public need and limited in scope by the constitution. This is making increasingly more people to worry that every additional $ sent to the government contributes to government waste and takes away from the economy. At the end of the year we will have a larger debt and an increasingly large interest payment on the debt.

    POWER, will be in the hands of what ever foreign country holds our debt, since we are unable to pay them back and they can dump our debt at any time. We also are almost guaranteed to have larger interest rates on our debt in the near future which will snowball our debt payments to an unsustainable level within the next 10 years.

  18. louiswi says:

    Excellent! ( I got a little puffy on this one.)

  19. dead hobo says:

    BR thunk:

    The issue I am raising here is not politics but hypocrisy. Are the new deficit hawks legit, or is this merely partisan politics as usual ?

    reply:
    ————–
    Of course they’re ‘legit’. What are you thinking? They plan to start running a tight ship, work long hours, promote honesty and integrity, and end waste in government.

  20. EmeInfo says:

    “I continue to see the Austerian movement in the United States as thinly disguised partisan politics.”

    Hmmmm…the fundamental assumptive implication in your speechifying piece here is all debt and deficit are equal. So why not stick to facts and PROVABLE data relationships Barry? That is your argument against those who point to CRA/FNM/FRE as critical factors in the financial crisis, is it not? {btw, the truth is the reason you made that infamous bet is proofs are not possible in the Dismal Science, only assumptive laden correlations… hence there are no true Laws of Economics, ones that stand up to the standards of science}

    “The issue I am raising here is not politics but hypocrisy. ”

    Hypocrisy is your point? Then why not point out in the piece also the hypocirsy of those politicians and their polices who are against the Austerians?

    Et tu speechifying hypocricy……….

  21. Julia Chestnut says:

    The deficit spending is not the problem: it is the continued, double-down misallocation of resources that is offensive. I would have welcomed the “bailout” if it was pointed towards curing the extreme imbalances in the economy, building/fixing necessary infrastructure that we’ve allowed to decay during the preceding couple of decades of malinvestment, and towards prosecuting and/or winding up the malfeasors (depending on whether they are natural or corporate persons).

    I wholeheartedly agree that the minority party don’t give a real rat’s butt about deficits, it is all partisan politics and who gets the funds. But it appears to me that we’ve reached a point in the capture of the government where no one sees the real economy as their constituency: everyone is bought and paid for by the FIRE lords.

  22. ubnutsagain says:

    BR: “The issue I am raising here is not politics but hypocrisy.”

    May you shout this truth from every mountain top and street corner across the land.

    BR: “Are the new deficit hawks legit, or is this merely partisan politics as usual ?”

    Forget the partisan label, it’s just politics … er, correction: It’s pure, unadulterated male bovine fertilizer.

    We were warned by Alexis de Tocqueville, way back in the 19th Century, who observed in his book “Democracy in America” that the Achilles Heel of the American form government is the electorate’s ability to vote itself money.

    Politicians of all stripes know only too well how important it is to spend, spend and spend … for their constituents.

    Thus, we have deficits … and hypocrisy up the a$$.

  23. DM RTA says:

    The issue here is less about hypocracy and more about the nature of social trending. If social trending (especially economic trends) are reactive to what we have just done then there is indeed a big mystery re the divergent outcomes of two Presidents. But if social trending is the result of an internal group force with no handles to steer us by, then even the sound bite crowd might pause and rethink what is causing what(?).

    If it is time to correct our economy of past massive excesses, then it is time to correct. The problem is that this one sentence could put a lot of pundits out of work.

    The guest on Charlie Rose last night defended the lack of new drugs in the first decade following the human genome being detailed as an investment in our children…and that no one should have to defend an investment of that time frame.

    Eventually we will see a period of deflation in the same way…and this crazy discussion about spending conjured money to address deeply rooted problems will be put into proper context.

    The Auterian movement ain’t going away because it is more than partisan politics. Anyone thinking rationally would not try to build a new political party on a single idea of cutting spending. All you have to do it look at the mess that the politicians have made of it since grabbing hold. Austerians are a symptom of a shared social value that says ‘let’s stop kidding ourselves, please’. And that might be the best investment we can make for our kids’ generation.

  24. Jeff P says:

    Well of course there is some level of hypocrisy, especially among elected officials. However, many of us were concerned about spending during the Bush administration, i.e. the “Porkbusters” movement and in general sitting out much of the 2006 and 2008 elections.

    That said, don’t you see a big difference between 200-400B deficits and 1.2T-1.6T deficits?

  25. Rikky says:

    Hacksaw has nailed it. At the end of the day its all about jobs and Reagan’s approach allowed private enterprise to create them whereas Barack’s approach would filter any such growth through controlled means under a nanny state. While Reagan’s approaches had their flaws I’d take his path over BO’s any day. While Rome burns our politicians continue to hack away at each other. When are those 8 million jobs coming back? If they do come back in what form? I can tell you at my Fortune 500 we’re coming up with ever new and inventive ways to outsource work to lower cost areas where the labor is 8-10x cheaper. Jobs that I would’ve taken 15 years ago are no longer available in this country. This is going on all over and the greatest driver of growth in the SMB market is being overly taxed. The ship that is our political system is too big to turn let alone steer and I fear what the future holds.

  26. rktbrkr says:

    Rikky, Agree 100% about jobs, without a recovery of real living wage jobs then single, double,triple dip & rebound recoveries will be headfakes, the economic feet will never leave the ground.

    This country need an industrial policy tied to real free trade not mealy-mouthing about obvious currency manipulation. In addition to his other shortcomings sending Turbo Tim to deliver a tough message just drips of weakness.

    The TBTF own the US government thats why industrial companies that really produce things are allowed to fail with abandon but not the Big Banks which have been given immortality in the past 3 years.

  27. td says:

    I wish it were a simple matter of hypocrisy but I don’t believe it is. Clearly the comments of Kyl and posters Rikky and Hawksaw indicate that a number of people simply believe *some* government spending is magical regardless of the overall economic climate and some spending is always bad regardless, and the fact that those positions just so happen to mirror perfectly their social agendas just reinforces the original idea. The perfect feedback loop. Unless and until conservatism can rid itself of the last of the supply side dead enders it wont have anything relevant to say.

  28. V says:

    What you are saying is true, especially with the siphon each other’s pork barrel attitude of congressman. I’m not really sure why the Russians used spies in an attempt to obtain political influence, clearly they hadn’t heard of the Barney Frank campaign donation.

    However this is definitely a time for leadership from the Whitehouse as to how to recognise the wastage in the system, re-prioritise spending for growth and produce a credible plan for the future. In these regards the advice received from the economic team has been poor.

  29. wally says:

    Jobs? We are creating millions of them.
    However, they are in China. Who sends them there? Corporate execs who want to maximize personal gain and have the rest of us pay the social costs of having a generation of joblessness.

  30. wngoju says:

    good for you br

  31. Mike in Nola says:

    It’s not just thinly disguised partisan politics; it’s thinly disguised racism. And, he’s got a Muslim middle name. If you don’t get this, you don’t get the same emails I get.

  32. Mike S says:

    I very much agree with the post here, except for giving Reagan more credit than he deserves by saying most of the national debt under him was accumulated before he arrived.

    Seems to me the budget was pretty close to balanced in the late ’70s, no?

  33. jcmcn says:

    I’m sure that you’ve mentioned it somewhere, but could you point out where you heap an equal amount of scorn on those who howled about deficit spending when Republicans were in office, bit are now silent? If you have mentioned it, many thanks for the link, but I can’t help but ask if you are only being critical of Republican hypocrisy? Hypocrisy is not something that is in short supply in Washington, and it’s not limited to one side or the other.

  34. WFTA says:

    The federal government installed by the 2000 election gave a trillion dollars to the wealthiest 2 % of Americans with the expectation that the children and grandchildren of the other 98% of Americans would be taxed for it in the future.

    The idea may have been that the wealthiest 2% would invest the windfall in productive industries that would require skilled, educated workers and would reward those workers accordingly. It may have been that the wealthiest 2% simply wanted more wealth and the elected officials chose to comply with that wish.

    It now appears that rather than having been invested in productive industries, that trillion dollars (owed by your children and grandchildren) joined many other trillions of dollars which were misallocated into unaffordable real estate, vastly over valued commodities and fixed income securities with names like Magnetar and Abacus.

    That the enablers of the government installed in 2001 now find national debt and deficit spending to be catastrophes demanding immediate reversal does smell of disingenuity if not outright hypocrisy. However, I think it is actually the Republican Party’s continued descent (or ascent, if one takes that point of view) toward complete political maximalism that values only the opposition’s failure; regardless of the destruction to be visited upon the remainder of the citizenry.

  35. Petey Wheatstraw says:

    This isn’t about deficit spending. As Dick Cheney — torturer, traitor, chicken-hawk and chief piglet sucking at the tit of big government — said (or parroted), “deficits don’t matter.” In the context of a fiat money regime(s), he was correct.

    This is about the transfer and allocation of wealth and debt. One party seeks to further enrich the top tier (including the ‘people’ we refer to as ‘corporations’), the other, ostensibly, but fecklessly, seeks to stabilize the financial status of the lower classes.

    Right now, the wealth is concentrated at the top as it hasn’t been since the early 1900s, if ever; the debt (including the huge government debt) is concentrated in the bottom two-thirds in amounts never before contemplated.

    Those seeking to cut the deficit are encouraging even greater imbalances of wealth (the haves can keep, the have nots pay the debt — in perpetuity).

    In our current situation, inflation (in the absence of adequate taxation = increasing deficits) is the great equalizer, deflation (in the absence of adequate taxation = austerity) is debt slavery.

    The current debate isn’t about deficit spending, it’s about disenfranchisement.

  36. MorticiaA says:

    @Mike in Nola:

    “It’s not just thinly disguised partisan politics; it’s thinly disguised racism. And, he’s got a Muslim middle name. If you don’t get this, you don’t get the same emails I get.”

    B. I. N. G. O. In this day and time (thank goodness) we can’t throw around racist terms in public, but I notice that other, acceptable terms are being substituted. It’s apparently acceptable to call Obama labels that incite hatred like “Communist” or “Leftist” — those labels are being thrown about with such ease by some that I truly wonder if it’s their way of calling him something equivalent to a racist one.

  37. bondjel1 says:

    I would say that it was worse than BR paints it. I recall vividly that at the time Reagan supporters repeated over and over again and the media also parroted it, that the American people just didn’t care about deficits, that it was just too abstract a matter for them to become mobilized about. And of course we have Cheney’s recent statement that Reagan “proved” that deficits don’t matter. But hypocritical statements apparently don’t hurt the hypocrite because I guess the American people just don’t recall or aren’t paying that close attention.

  38. DL says:

    People who favor more government spending should be willing to admit that the spending creates a tax liability. And they should be willing to tell us who, exactly, is going to be paying the higher tax bill.

  39. hankest says:

    Just for clarification. A year after his massive tax cuts, during the heart of the recession, Reagan raised taxes by rolling back a third those cuts. He also raised taxes in 1983 and 1984, mainly through a gas tax and raising taxes (i.e., closing loopholes) on businesses.

    So between 1982 and 1984, the years the economy started recovering, Reagan increased spending, but also increased taxes. He continued to increase taxes throughout his second term.

    ~~~

    BR: The really big Reagan tax increase were in 1988 . . .

  40. [...] Deficit Chicken Hawks vs Ronald Reagan [...]

  41. eightnine2718281828mu5 says:


    At the end of the day its all about jobs and Reagan’s approach allowed private enterprise to create them whereas Barack’s approach would filter any such growth through controlled means under a nanny state.

    W’s approach also allowed private enterprise to create jobs, but the results were less than inspirational, while in the early 90′s the right predicted that Clinton’s ‘nanny state’ policies would quickly lead to economic disaster.

    It seems apparent that the economy is much more complex than the ‘low taxes/low regulation good’ toy-model advanced by Republicans.

    Which isn’t to say that their policies are totally lacking in merit; Republican coffers benefit handsomely from their low-tax jihadism.

  42. wdp says:

    The real issue here is this: RR stood for all Americans, and was very business-friendly. His policies led to a rebound in business conditions and new hiring. BHO stands for only some, a small selected few Americans, who share his warped view of the world. BHO and his administration are also demonstrably and extremely anti-business. Ask any small business owner who’s been around long enough which approach they prefer to run their business in. I deal with many bank managements and they all tell me the exact same thing – small/medium sized businesses are paralyzed, afraid to hire, due to the policies in Washington. They’re facing sharply higher healthcare costs, sharply higher taxes, potential cap & trade legislation, new immigration policies, etc. Their decision, collectively, is to put off on hiring anyone, if not cutting back employees. BHO and his gang of warped minions simply don’t understand that this uncertainty, their anti-businesss attitudes, and misguided priorities (suing AZ for example when Rhode Island has the exact same law) are what is prolonging the recession. Very easy to understand if you have a balanced viewpoint about the economy.

  43. common-sense says:

    Uh Barry…what part of the word “unsustainable” do we not get? Debt to GDP, housing prices that in some areas were 11:1 median price/median income ratio, $40,000 pickup trucks. And we *want* to continue to prop this up? Am I missing something?

    F*ck it. Let’s just give every American 1$ million and let’em blow it any way they want. Maybe then I’ll buy AAPL…

  44. Darmah says:

    When Republicans (not just Ron Paul) call for cutting defense, subsidies for oil, agriculture, etc., then I might believe they are serious about the country’s future.

    When Republicans stop claiming that tax cuts (mostly for the wealthy) generate more revenue, trickle down, force gov’t to be smaller, and don’t need to be offset, then I might believe they are serious about the country’s future.

    When Republicans acknowledge that markets and industry cannot self-regulate, then I might believe they are serious about the country’s future.

    Until then they can all go to hell.

  45. scharfy says:

    @Hankest

    Very true. Reagan didn’t get anywhere near the revolution he promised. He was forced, like the current Pres, to make political compromises in office.

    A good look at this reality is found in “Reagan’s Liberal Legacy” http://www.washingtonmonthly.com/features/2001/0301.green.html

    I read it when he died and it just goes to show you that while the ideologues battle, life tends to be shades of grey, not black or white.

    disclosure: I am a quasi-republican

  46. BTUR says:

    “Hacksaw has nailed it. At the end of the day its all about jobs and Reagan’s approach allowed private enterprise to create them whereas Barack’s approach would filter any such growth through controlled means under a nanny state. While Reagan’s approaches had their flaws I’d take his path over BO’s any day.”

    You’re not the only one that’s made a similar point to this. Do you really think that Barack somehow wants all jobs and growth to come from the government? In a $14+ Trillion a year economy, you really think one $800B stimulus bill (which included some tax cuts) means his policy is that government should take over for the private sector? Really? There are valid criticisms of Obama’s policy thus far. This is not one of them. You’re right that it’s about jobs. However, the point is that the private sector – an unorganized mass of individual interests, isn’t in a position to do anything about it, since each individual/business can only sell what people will buy, and people without jobs aren’t doing much buying. The government actually has the resources (of course they’re really our collective resources being put to use) to put a concentrated effort of spending out there to filter through the economy and help create jobs – both public and private, to get us going again. That’s the point of stimulus. It’s not to replace the private sector, it’s to create jobs that get the economy going again. Not that I’m saying the stimulus was the right size, or done correctly, just trying to correct your interpretation of what stimulus is trying to accomplish.

    When coming up with your criticisms, please look at the facts before coming to a conclusion. If you think tax cuts were the right method, look at the evidence of how tax cuts work compared to the alternatives (and the actual research I’ve seen suggests tax cuts, in the current climate, are not particularly effective as stimulus). Anyways, when it comes down to it, we need to create jobs. As long as people are unemployed, we’re going to have a debt/deficit problem, and it’s not something we can start to fix until we’re back to full (or near full) employment – and if you want evidence for that, look at past posts on this blog on how much of the deficit is the result of our current unemployment problem (a large share, somewhere in the neighborhood of 40-50% of the deficit or so if I remember correctly)….

  47. Patrick Neid says:

    Remind me again who does the spending.

    And who is this quote about?

    ” These are people who will say anything to keep the subsidies and tax benefits flowing to their electoral base. They will say anything –regardless of whether they actually believe these things — to thwart the opposing fellows priorities.”

    God for a minute I thought you were talking about Dodd, Frank, Pelosi, Reid, Biden and Obama to name just a few but then I realized you were throwing some red meat around.

  48. druce says:

    Ha! You missed the memo.

    It’s unemployment benefits that have to be paid for with cuts elsewhere, not tax cuts for the rich, or foreign invasions.

    http://voices.washingtonpost.com/ezra-klein/2010/07/jon_kyl_gives_away_the_game_on.html

  49. Mannwich says:

    Of course it’s politics as usual. Isn’t everything?

  50. BTUR says:

    @wdp – thanks for the partisan politics as usual. Care to take a reality based view of things, though? It was just yesterday that this blog actually looked at what was causing businesses to be “paralyzed” as you put it, and the conclusion appears pretty straightforward – it’s because of a lack of demand. When people don’t have jobs, they can’t buy your product – when people aren’t buying your product, you have no reason to hire anyone. Don’t let the facts get in your way, though. Keep using your catch phrases and keywords in place of factual analysis. Whether Obama is “anti-business” or not is besides the point. The point is we have an employment problem in this country, and we need to fix it. What’s the best way to fix it?

  51. Equityval says:

    BR: It’s fine to call BS on the insincere deficit hawks who will resume spending once they are handed the reins of power. But what you and the other Keynesians ignore is the groundswell of people that are saying “a pox on both your houses, you are all profligate spenders of OPM who are leading us on the road to serfdom”. This is the essence of the tea party movement which is quite willing to tell the mainstream Republican party, that spent like drunken sailors when it was in power, to go take a hike as it did in Utah and Florida recently. By and large, these do not look like a bunch of people who want power for power’s sake, they are more interested in fiscal sanity and trying to protect their own capital from the ever larger maw of government. There is much more than just partisan sourgrapes going on here and you are missing a big shift in the electorate’s position – they aren’t drinking the Keynesian Kool-Aide.

    Also, this comparison of the two administration’s policies without taking the broader economic context, as well as the overall intent of their agenda into account is, frankly, glib and looks like pretty much like a partisan screed to me. The economy coming out of the early 80s recession grew quite rapidly so the deficits incurred in the recession were not as big a drag in the subsequent recovery as those that we will carry in our much more modest rebound this time around . Moreover, the overall debt burden, both public and private was DRAMATICALLY lower, not to mention that the scale and duration of the mid recession deficits were much lower as percent of GDP than what we have now. Finally, Reagan’s agenda was one of reducing the presence of government in the economy and reducing regulatory contraints which promised faster growth in the future. Obama’s agenda is the promising to do the exact opposite.

    There are sane people, not motivated by any particular partisan agenda, who look at the fiscal business plan that Obama has asked the country to sign up for (deficits of >5% of GDP as far as the eye can see – faster than the trend rate of economic growth – thus insuring an ever upward debt spiral) and see a scenario of much greater solvency risk in this country. They are not stupid or insincere. The Keynesians owe them a credible answer of how we avoid that scenario. I haven’t heard it. Perhaps you should put some thought into that question.

  52. Minderbender says:

    Ronald Reagan also pointed out, more seriously, that the deal was that for every $1 of tax cuts it was agreed to find $3 of spending cuts. Couldn’t control that, and it didn’t happened. Would have been a different story today if it had. The potential problems of future were seen then, when we had time to still solve them.

    It took the Clinton-Gingrich budget compromises to actually effect a change in a positive direction. A standoff that worked, in that sense not dysfunctional.

    The 2000s under GWB was shown to be the biggest government spending binge and expansion of government since LBJ (and bigger than Roosevelt in % terms) – since most Republicans in office were part of this lapse of judgement, the hypocracy label sticks, with a couple of exceptions in the form of NJ governor or new ideas with new proposals from the likes of Paul Ryan. Noticeable that the Republican party leaders are queasy at signing up for new approaches based on these sensible, if radical, proposals. Bankrupt.

    Whatever margin for hypocracy could be tolerated in real terms up to now, the margin for errors has now been reduced to near zero, because we are indeed at the actual tipping point.

    The issues are real, with real consequences and real risk.

    As a country, we had our chance to continue the Clinton-Gingrich stalemate along a glide path to a healthier situation, but we instead boosted spending at a 6-8% clip for 8 years, which has shown to have been nearly disasterous. The current spending binge, in light of real consequences, in context of unsustainable funded and unfunded liabilities, is cause for pause, thought, and change of direction.

    For Republicans and Democrats alike, if only a national interest could be put ahead of party, special interest, faction, and political career. Doubtful about that. Thrifty living simply isn’t in our character anymore.

    Seems we will be taking the pain – and moreso the next generations who will be paying for all this and living with the consequences.

  53. Petey Wheatstraw says:

    wdp Says:

    The real issue here is this: RR stood for all Americans, and was very business-friendly. His policies led to a rebound in business conditions and new hiring. BHO stands for only some, a small selected few Americans, who share his warped view of the world.
    __________________

    Got any facts to back that opinion? Please specify exactly which “small selected few Americans” Obama favors.

    Obama is just another corporatist — he favors the same small group of Americans that Reagan did.

    The business “rebound” you tout was based on debt that we’re — that is to say, the middle class, small-businesses and non-business persons — still paying.

  54. riley says:

    It is exactly this type of , if my guy does it it’s the right thing to do, if your guy does the same thing it is the worst thing that can be done hypocrisy that will be the cause of our downfall. Either a policy is right or wrong, beneficial or not, regardless of who’s idea it is. People need to support or oppose a policy based on the policy, not the party promoting it.

  55. PDS says:

    BR…i think u had too many cocktails at the party last nite….comparing Maximus Ronaldus to the current POTUS?…that is a non starter…the uncertain world, both geopolitical and economic, that RR “inherited” was far more challenging then what the current guy faces…10 years of economic stagflation; double digit inflation and interest rates; “The Death of Equities”; a loss of the American spirit and chronic national malaise following the war in SE Asia; the beligerent and agressive Soviet Union, MAD…etc etc …..please set aside the “hypocrisy” issue of running deficits, his progrowth economic policies and defeat of the bankrupted Soviet Union without firing a shot via a strong defense (higher deficits were critical in out spending the Commies) cleared the way for economic expansion and prosperity that lasted for over two decades…and after “The Wall” came down the rest of the world profited from his policies too ….The world is better place thanks to the overall progrowth policies of RR….it remains to be seen if President Obama, with his anti growth policies of record hi deficits, re-regulation, pro union card check, anti business, defence cutting, entitlement expansion, protectionsism and class warfare can live up to RR’s successful legacy and keep the global growth ball rolling…….running deficits is just one part of the puzzle….borrowing money is one thing….how you spend the borrowed money is what’s important …RR invested it wisely…so far Mr Obama hasn’t

    ~~~

    BR: You actually believe that the January 20th 2009 situation is much better than the January 20th 1981 world?

    I see it very very differently . . .

  56. Petey Wheatstraw says:

    Equityval Says:

    “Finally, Reagan’s agenda was one of reducing the presence of government in the economy and reducing regulatory contraints which promised faster growth in the future. Obama’s agenda is the promising to do the exact opposite.”
    ____________

    That faster growth was fueled by wealth transfer to the friends of Ronnie, with debt to you and me. Tell me, Equityval, exactly how much did the average American’s income or assets grow as a result of Reagan’s policies? Tell me, in light of lower taxes offset by deficit spending, how any business since RR benefitted from reducing the presence of government in the economy. If Reagan planted the seeds of prosperity, why are we harvesting the fruit of debt now? Where are those huge corporate earnings and living wages for all of us (since you say Reagan was for al Americans)?

    And, since you mentioned it, please elaborate on the differences between Obama’s borrow and spend policies and those of Reagan. Explain how Obama’s agenda is different in any way.

    You seem to be motivated by something other than facts.

  57. BTUR says:

    “The issues are real, with real consequences and real risk.

    As a country, we had our chance to continue the Clinton-Gingrich stalemate along a glide path to a healthier situation, but we instead boosted spending at a 6-8% clip for 8 years, which has shown to have been nearly disasterous.
    Seems we will be taking the pain – and moreso the next generations who will be paying for all this and living with the consequences.”

    Yep – hits the nail on the head.

    “The Keynesians owe them a credible answer of how we avoid that scenario. I haven’t heard it. Perhaps you should put some thought into that question.”

    The problem is, we can’t avoid that scenario. The Keynsian model doesn’t really offer a solution to avoid it, but the thing is, the deficit hawks “solution” is an even worse alternative. Look up how much of the current deficit is coming from the lack of employment, it’s the single biggest factor in the deficit. We need to promote employment, right now – you can’t fix the deficit without fixing unemployment. The longer it takes to bring the jobs back, the worse our debt/deficit situation will be. As you said, though, we will be taking the pain, it just appears the best option is to do everything we can, right now, to get the economy going again so our “pain” will be less painful when the bill finally comes (whenever that may be).

    “Finally, Reagan’s agenda was one of reducing the presence of government in the economy and reducing regulatory contraints which promised faster growth in the future. Obama’s agenda is the promising to do the exact opposite.”

    I dunno, can you support this statement with evidence? Reduced regulation promises faster growth? Maybe it does, but then again, sometimes it also leads to a disaster like the one we’re in. So what does the evidence suggest we should expect? In the current situation, does the government negatively or positively affect the economy? What does the evidence and research suggest, as opposed to the political ideology based on….nothing?

  58. BTUR says:

    “….The world is better place thanks to the overall progrowth policies of RR….it remains to be seen if President Obama, with his anti growth policies of record hi deficits, re-regulation, pro union card check, anti business, defence cutting, entitlement expansion, protectionsism and class warfare can live up to RR’s successful legacy and keep the global growth ball rolling”

    …lots of buzzwords in there, but I’m not seeing any real substance. Unless you care to back them up with facts/evidence to actually provide some real analysis?

  59. Rikky says:

    >>Got any facts to back that opinion? Please specify exactly which “small selected few Americans” Obama favors.

    the federal government suing arizona for its immigration policy as being unconstitutional. classic textbook example and a fatal flaw of obama’s that shows he’s in way over his head in not understanding the outcome of attempting to pander to a small group of people (e.g. far left/latinos) at the expense of moderates and independents. silly obama doesn’t realize the latinos won’t vote for him anyways since they’re been hit very hard by the economic climate and have yet to get off the mat.

    ~~~

    BR: This is all opinion about future outcomes, no facts.
    Please stick to factual sources or go to Drugde/Atrios for your fill of partisan nonsense.

    Thank you

  60. Reagonomics says:

    Um….no. Reagan’s two administrations resulted in the highest levels of federal spending as a percentage of GDP since 1962, or in the 20 following years.

    Furthermore, Reagan’s budgets tripled the annual deficit, necessitating tax increases by both Reagan and Bush, costing Bush re-election. Debt as a percentage of GDP soared under both Reagan and Bush, only to decline under Clinton.

    So, no.

  61. PDS says:

    Yes BR..we agree to disagree…i do think that the world is much better off today then it was in 1981…cause I was there……. as a fresh new immigrant coming to the US with my only asset…a beat up Honda….. personally, I firmly believe that I would not have been a successful entreprenuer without the policies of RR…including his deficits/investments…his progrowth policies opened many doors… for both of us…on that I’m sure we can agree…u are right to bring up RR…his over riding positive and unifying legacy should remind us that there is always hope for the future…regardless of which political party has power currently.

    ~~~

    BR: We agree; it is a better place — for you!

    In all seriousness, a bad as the 1970s were (oil shortages plus polyester & disco) dfrom an economic standpoint,t he current crisis is much worse than the 1980/82 recessions

  62. formerlawyer says:

    To Kort:

    George Santayana
    ‘Those who cannot remember the past are condemned to repeat it.’
    Life of Reason, Reason in Common Sense, Scribner’s, 1905, page 284

    Niccolò Machiavelli
    “Anyone who studies present and ancient affairs will easily see how in all cities and all peoples there still exist, and have always existed, the same desires and passions. Thus, it is an easy matter for him who carefully examines past events to foresee future events in a republic and to apply the remedies employed by the ancients, or, if old remedies cannot be found, to devise new ones based upon the similarity of the events. But since these matters are neglected or not understood by those who read, or, if understood, remain unknown to those who govern, the result is that the same problems always exist in every era.”
    Discourses on the First Ten Books of Titus Livius, Book 1, Chapter 39

  63. It’s funny, When Reagan, or Greenspan, are ‘discussed’, no one, ever, seems to mention: “…In 1983, the payroll tax was increased substantially in response to the recommendations, the previous year, of the Greenspan Commission on Social Security Reform.

    Prior to 1983, Social Security had operated on a “pay-as-you-go” basis with each generation responsible for paying for the benefits of the generation that preceded them. The 1983 legislation changed the nature of Social Security funding. In addition to paying for the benefits of the preceding generation, as was customary, the baby boomers were also required to pay additional taxes to partially pre-fund their own retirement. The net result is that the baby boomers have paid more into Social Security than any other generation. Yet they are often made scapegoats and blamed for the Social Security funding problem. I am not a baby boomer, but I am very sympathetic to them. They are getting a bum rap.

    The intent of the 1983 legislation was to generate large Social Security surpluses for the next 30 years that were supposed to be saved and invested, in order to build up a large reserve in the trust fund that could later be drawn down to pay benefits to the baby boomers. The 1983 payroll tax hike has generated more than $2.5 trillion that is supposed to be in the trust fund. If the trust fund actually held this amount in real assets, full Social Security benefits could be paid until at least 2037 without any changes. Unfortunately,…”
    http://dissidentvoice.org/2010/07/was-the-social-security-money-%E2%80%9Cborrowed%E2%80%9D-or-%E2%80%9Cstolen%E2%80%9D/

    but, hey, these daze, what’s a few ‘Dollars’ one way, or the other..

  64. Petey Wheatstraw says:

    Rikky:

    Rampant illegal immigration into the US for the purposes of wage arbitrage is a Republican orphan. If they had enforced the law — on both the supply and demand sides of the equation — we wouldn’t even have an issue.

    If the Arizona law is unconstitutional, in the Federal government’s opinion, why would they NOT challenge it? Do you really think the AZ law is appropriate? Do you even know what it allows? Are you aware that there has already been one case (that I know of), where a natural American citizen was arrested, despite having a valid driver’s license, and jailed until his wife could obtain his birth certificate? Do you not see how unconstitutional this policy is? Are you fuckin’ blind?

    Also, how small a group do you think latinos in America are? Here you go:

    http://www.msnbc.msn.com/id/8147476

    One seventh of the population, and, as you say, they have not gotten up off the mat. If Obama is trying to help them off of the mat by pandering to them, as you say, then why wouldn’t they vote for him in droves?

  65. PDS says:

    BR…yes it is a better place for me and my family…shouldn’t that be our benchmark?…pursuit of happiness and all that?…filet mignon on every bbq…ferrari in every garage (actually i like the new gull wing MB u hilited on your weekend blog)…you are way to pessimistic BR….u really can’t admit that u are better off today then in 1981?…vacay on the hamptons, successful blog site, media attention, uber successful financial services biz…bright future u have….u think someone just waved a wand to create that success for you….we all should get on our knees and be thankful for the prosperity this country has compared to others….seeting parochialism aside, I recomend u go spend some time in rural China…u may come to a different conclusion…

    ~~~

    BR: Well, I look art (ahem) the Big Picture. So the indiviudal tales of improvement are not my bailiwick . . .

  66. napster says:

    @Mark Hoffer

    I disagree with this statement: “Unfortunately, none of the surplus revenue was saved or invested in anything. It was all spent by the government on wars and other government programs without making any provisions for repaying the money.”

    It is my understanding that the Surplus revenue purchased Treasury Bills to be used when the Baby Boomer generation expenses start outpacing the pay-as-you-go.

    The money was not “spent” as you and the author at the link are stating. The Treasury Bills that were purchased with the surplus are like any investment.

    The government might have played accounting games, ie. treating this surplus as a positive gain on the balance sheet — but these are just accounting games used to conceal the size of the Federal Deficit.

    The money is still there. The surplus is still there, and when the time comes these Treasury Bills will be sold to pay for the necessary expenses once these expenses go beyond the pay-as-you-go basis.

    If I am wrong, please clearly explain to me how I am wrong and provide me with a reliable source.

  67. Ted Kavadas says:

    I would agree that much of the current rhetoric is being highly influenced by political motivations. This is unfortunate as it obscures deeply ingrained fundamental problems that are going unresolved.

    I remain deeply concerned about the deficits and debt, especially now that sovereign debt levels have been receiving greater scrutiny. Here are my thoughts on the issue of the national debt, for those interested:

    http://www.economicgreenfield.com/2009/11/30/the-national-debt-a-few-comments/

  68. southernboy says:

    BR, you rock. While the horse manure is generally spread wide and deep, this time it can and will seriously hurt us. Hell, even Goldman agrees with Krugman! See their bit out yesterday and their dismal outlook based on the politics of know-nothingism (aka the Austerians, Chicken Hawks, Tea Bags, etc).

    The Fed is pushing on a string. There is no velocity–the money ain’t moving. And no matter how much QE they attempt with no velocity it doesn’t matter. The only thing that will bring down unemployment is fiscal stimulus. And that’s a dead letter politically. Time to cue up Graham Parker’s “Discovering Japan.”

    Of course, as you note, Republicans are the big spenders when it’s their turn to spend. For now, the calls for deficit reduction are just old “starve the beast” wine in new bottles.

  69. yudodat says:

    I agree with the hypocrisy, but I think you are missing some big points such as Obama is raising taxes in a recession and Reagan did a tax cut. Both are spending out of our ability to pay, but you are comparing billions (Reagan) to trillions (Obama). [BR: To be factually precise Obama lowered taxes for the middle class int he stimulus package. And, he is not raising taxes — he is allowing the unfunded Bush tax cuts to expire as Bush created them. If you want to lame someone for the tax increase, it is Bush and his Congress for putting a sunset provision on this!]

    Government spending on defense and science is 1 thing. Spending on unemployment benefits for 2 years and giving health care away for free is totally different. [BR Why is that different? Because it reflects your priorities?]

    This government spends all the revenue they take in on Social Security, Medicare, and Medicaid. Everything else is being borrowed. There is no way to pay off $13 trillion, so is the theory just to spend as much as possible until we are cut off? Repubs under Bush has a deficit that never topped $300 billion when in control. Now we are looking at $1.4 trillion deficits.

    ~~~

    BR: I do not know where you get your data from.
    Look at the following charts:

    2003 forecast

    Sept 2008 WSJ projection of deficit

    2009 forecast

  70. Petey Wheatstraw says:

    southernboy:

    Yup. It ain’t anemia, it’s poor circulation that’s killing us. In a fiat universe, it’s all about the allocation, as the quantity is incidental.

    “starve the beast” whine . . .

  71. theorajones says:

    “the president ignored the critics, and put forth a deficit laden budget that contained a massive stimulus and tax cuts…By the second year of his presidency, the stimulative effects of the deficit had their impact. Unemployment began to come down, incomes went up, and the stock market roared ahead.”

    A good point, but it’s worth noting that Reagan’s deficit stimulation is probably not what brought the economy back. Volcker had hiked the federal funds rate up to 19% to break stagflation, and then dropped it to 8% by the time Reagan ran for re-election. This huge drop in the interest rate of course increased growth and created jobs. This isn’t to say that Reagan’s spending didn’t help create jobs–it probably helped a bit.

    Barack Obama’s problem is we’re not facing stagflation, but a liquidity trap. We can’t lower the federal funds rate any farther, because we’re at the zero bound. And Bernacke–unlike Volcker–is able, but unwilling to take the politically unpopular but fiscally necessary actions to address our economic problems. Obama is _willing_ to do politically unpopular things to improve the economy, but he is _unable_ to do them because Congress won’t pass the legislation (largely due to the fact that Republicans will filibuster any stimulus).

    I absolutely agree with you that the chickenhawks who gave us this spectacular deficit are focused on “power and money and legislative priorities and cash.”

    I would even go a step farther and suggest many of them know full well that additional spending would help the economy, and they are opposing it because an economic recovery means their party will lose the next decade of elections.

  72. theorajones

    We are agreed: RR gets more credit than deserved, Volcker, not enough

  73. Mannwich says:

    So you mean that PDS’ life does not = “The Big Picture”?

  74. napster,

    See:

    “…The Social Security trustees confirmed the worthlessness of the IOUs in the 2009 Social Security Trustees Report with the following words:

    “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

    In order for Social Security to pay full benefits after 2016, it will be necessary for the government to begin repaying the money it has spent on other things. This will mean increased taxes and/or additional borrowing…”

    from the link, that I had included, above..
    http://dissidentvoice.org/2010/07/was-the-social-security-money-%E2%80%9Cborrowed%E2%80%9D-or-%E2%80%9Cstolen%E2%80%9D/

    and, for you, another Source..
    http://search.ssa.gov/search?q=cache:aU006q_3pmwJ:www.socialsecurity.gov/OACT/TRSUM/+Neither+the+redemption+of+trust+fund+bonds%2C+nor+interest+paid+on+those+bonds%2C+provides+any+new+net+income+to+the+Treasury%2C+which+must+finance+redemptions+and+interest+payments+through+some+combination+of+increased+taxation%2C+reductions+in+other+government+spending%2C+or+additional+borrowing+from+the+public&output=xml_no_dtd&ie=UTF-8&client=default_frontend&proxystylesheet=default_frontend&access=p&oe=windows-1252
    (near the bottom..)
    same link: http://www.socialsecurity.gov/OACT/TRSUM/

  75. eightnine2718281828mu5 says:


    We are agreed: RR gets more credit than deserved, Volcker, not enough

    For definition of ‘prescience’, see this NYTimes article from 1987 re Reagan’s choice of Greenspan to replace Volcker

    http://www.nytimes.com/1987/06/03/business/volcker-out-after-8-years-as-federal-reserve-chief-reagan-chooses-greenspan.html


    The main philosophical difference between Mr. Volcker, a Democrat, and Mr. Greenspan, a Republican, appears to be in their views of the structure and regulation of the banking system. Mr. Volcker has tended to resist deregulation of banks while Mr. Greenspan is more favorably disposed to it.

  76. PDS says:

    OK BR…sticking with the big picture of this thread…its the future that counts so let’s look at PROJECTED Obama budget deficits as a % of GDP as compiled by the OMB and CBO and presented on the Cleveland Feds web site…as a % of GDP budget deficits will EXCEED those of the RR booming 80″s by a significant amount (6% under RR…12% next year) only surpased by significant deficits following WW2…..on a day when the President’s own deficit commission is warning about the “cancer” fo deficits…we continue to pile more debt on…that is the real hypocrisy of highly partisan political umbrella we currently live under….

    Btw BR…tax rebates and credits in the stimulus package for the middle class that u refer to as tax cuts? they are faux tax cuts as they aren’t permanent…and when the tax/deficit commission make their recomendation to increase taxes for EVERYONE via a VAT?…what will u call that?

  77. hankest says:

    scharfy

    That wasn’t a point i was trying to make. If someone prevented RR from his “revolutionary” idea of lowering taxes more and more during the early 1980s, maybe we should be glad about that?

    Look, Reagan raised taxes during the worst of the recession, things soon got better. GH Bush raised taxes in the early 1990s as did Clinton, and rather than make that recession worse, things soon got better.

    I understand that correllation does not equal causation, i.e., i don’t believe simply raising taxes will make things better. Rather my point (if there is one) is to question the dogmatic belief held by many that taxes MUST be lowered during a recession to get us out of it – and raising taxes during a downturn is insanity that can ONLY make the recession worse. That’s clearly not always the case.

  78. Alaric says:

    BR –

    1. Your analogy to Reagan is amusing in some respects but flawed: debt to GDP in the 1980s went from less than 35% to 50%. Now it is going parabolic at 80% going to 95-100% with no upper limit in sight.

    Yes there was a lot of justifiable consternation about Reagan’s deficit and the increases to the debt, however the issue now is the absolute level of debt – how much higher can you go before there is a Europen style panic?

    2. Also note that Jimmy Carter began the deregulatory process, in airlines, banks and other industries – in the popular mind there is no memory of this but he really began reversing the incredible regulatory structures existing at that time.

    3. Don’t forget that Reagan significantly simplified the tax code, which closed loopholes and helped individuals and businesses to devote less time to tax compliance. I am sure with the new 1099 forms coming in 2012 those who can remember Reagan’s tax simplification will remember it fondly.

    4. Austrian economists are not = to political hacks. There are many who instinctively believe that high government debt levels reduce government and economic flexibility and are usually ‘solved’ through high inflation, which allows governments to steal from those with monetary assets.
    We should fear the potential for inflating away the debt being created — in fact one anecdote I like is that in the 1980s economics textbooks had chapters on inflation — now they don’t; be afraid.

    5. You shouldn’t let your political views and emotions get in the way of your investing…..also, I would take with a grain of salt the fact that most of those commenting here agree with you — it probably illustrates that the contrary to what they believe is true!

    http://www.usgovernmentspending.com/downchart_gs.php?year=1970_2010&view=1&expand=&units=p&fy=fy11&chart=H0-fed&bar=0&stack=1&size=l&title=US%20Federal%20Debt%20As%20Percent%20Of%20GDP&state=US&color=c&local=s

  79. beaufou says:

    It isn’t just hypocrisy, it seems politicians are living in some sort of online community completely removed from reality, campaign funding being the pot of gold.

    Some time before the crash I read more than half the population of the US was living in debt, the report said it was the first time since 1929 (did not check the info), that kind of worried me.

    The crisis happened because people were going broke and defaulting, the crash happened because of the derivatives attached to that bad debt, not the other way around.
    Now with millions more unemployed, I don’t think the problem is the stimulus, it is where the money goes, banks are back to business and corporations are making record profits.
    What happened to the original problem of people being broke?

    It rips my guts out to think that over forty million people are demanding charity through food stamps while corporate-finance institutions have walked away with the cash.

    This is the kind of decadence that brings down a society, so fuck them all for not wanting to help those in need and spend only to help those who don’t need it.

  80. riley says:

    @ Darmah

    Are all government subsidies bad or just the Republican supported subsidies? What about the subsidies supported by the Democrats?

    Are only Republican tax policy ½ truths evil? Are the Democrats tax policy ½ truths equally evil?

    Are only those who believe in self-regulation wrong? What about those that think government regulation can prevent all problems from occurring?

    Rather than be a home team hypocrite, if the policy is wrong then it is wrong regardless of which party promotes it.

  81. Rikky says:

    BR i’m surprised you’re singling me out as being partisan when the entire thread is such. the nature of the subject has personal political views at its very heart and is quite evident by the comments. unavoidable except at the 50,000 foot view on deficits and political climate which i will give you was probably your original intent but that didn’t hold up for long ;)

  82. Aaron says:

    I believe the budget deficit issue is one of partisian politics, with a side of legitimacy. The times have changed since Reagan’s day, but the politics remain the same – to blame the other party for prolifigacy in budget spending. The problem, as some of your posters above have pointed out, is the Republican Party in Congress votes “no” to any legislative action proposed by either President Obama or our Congressional leaders such as Nancy Pelosi and Harry Reid. The threat of budget deficits to our economic health, though, is real. Trade policies, such as reducing our dependence on imports such as foreign oil, as well as fiscal policies, such as spending cuts in both defense and entitlement spending, are needed to balance the budget yet are never seriously considered because of the lure of “earmarks” and the pull of lobbyists with influence and access to legislative leaders who have no political will to make difficult legislative choices.

    What I also find interesting is how the bond market views U.S. Treasuries as the “best of a bad lot” of sovereign credits with both budget and trade deficits. I would argue that the bond markets of today are nothing like the bond market back in Reagan’s time. The bond market under President Reagan did not have “vigilantes” pushing yields up like they do today. There were no CDS’ trading, to my knowledge, on soverign debt either. Only time will tell whether bond market participants sell off Treasuries to punish the U.S. for its fiscal prolifigacy spurred by partisian politics.

    I, of course, could be wrong in my opinion.

  83. Brett Tibbitts says:

    Barry, IMHO, you continue to read this issue completely wrong.

    The mistake you are making, IMHO, is to read the current deficit hawks through the lens of Republicans and Democrats. The current deficit hawks are not Republicans first. They are fed up with both parties. IMHO, the current Tea Party movement is first and foremost concerned about the amount of debt this country has accumulated and continues to pile on NOW.

    Only time will tell who is right here. But tipping points do occur, and IMHO we are currently at the beginning movements of the tipping point on DEBT, DEBT, DEBT and more DEBT. Perhaps, your view of this through cynical and partisan eyes is correct, but I doubt it. Again, only time will tell.

  84. darekkkk says:

    “Which raises an interesting question: We seem to be overrun with Austerians, newly minted deficit chickenhawks who recently have discovered the evils of deficit spending”
    Really? That’s against facts.
    I would rather say we seem to be overrun with BUBBLENOMISTS.

  85. Alaric,

    you keep that up, and you’ll be thrown out of the ‘Cool Kids’-Club..

    Points, as you’ve listed, are those inconvenient Facts that spoil a, heretofore, successful Agitprop campaign…

  86. PDS says:

    Theorajones says….”Obama is willing to do the politially unpopular things to improve the economy, but he is unable to do them because Congress won’t pass legislation…largely due to the fact that Republicans will fillibuster stimulus”…I don’t believe this is true….

    The fact is the Democrats have full majorities in both the house and senate and Theorajones is blaming the GOP?????If they can’t get their favored legislation thru with full majorities…I’d blame it on the Dem leadership…not the Republicans…also in the case of the stimulus, I believe there were a number of Dem senators who voted against it…six comes to mind

  87. PDS says:

    BTW…BR…just a suggestion…perhaps if u spent more time on “The Little picture” ie the individual…you’d have an even better handle on “the Big Picture”…..just a constructive suggestion to move away from the group/collective/elitist think of NYC…worked for RR!!!…ur hits would zoom!!

  88. Thor says:

    Without reading the comments yet – I’m going to count the “you are a closet east coast type liberal” comments as I read through them.

  89. sage25 says:

    I read an interesting comment on this post on Connecticut Comments http://connecticutcomments.blogspot.com/
    Here is the essence of the discussion:

    I have to say that Ritholtz should know better. There have been people worried about deficit spending for as long as I can remember, but it was not a dominant issue until now. The reason, of course, is that in the last 50 years, the size of the deficit was never anything like it is now. Bush took heat for running deficits of over $300 billion. Still, that was less than 3% of GDP. Obama has managed in one year to raise the deficit to about 1.5 trillion dollars or more than 10% of GDP. To make matters worse, Obama has pushed thorugh Obamacare and other spending measures which will increase the size of the deficit moving forward. On top of that, obama is pushing for new regulatory schemes like the Wall Street “Reform” and the oil drilling ban that will reduce growth, cut tax revenues and generally hurt the economy. As a result, it will not be possible to grow our way out of the deficits.

    So, are there any people who are just opposing the deficit for political reasons? Sure! But is there a serious reason and a lot of reasoned opposition to the deficits? You bet there is!

  90. VRWC says:

    Mr. Ritholz really needs to lay off the Krugman…. Obama’s deficits are just like Reagan’s?…. really? Besides being orders of magnitude larger, and from a substantially higher base, you might also spend a moment asking about what Reagan bought with his deficits. Besides the fast growing economy of the 1980’s ( All due credit to Mr. Volcker….)and a huge spike in government revenue (the deficits resulted because spending rose even faster than revenue…. Both parties were at fault….) but also the collapse of the Soviet Union, which led directly to the peace dividend that Bill Clinton got to spend in the 1990’s as we massively cut our defense budget as a share of GDP.

    More important, what is Obama buying with his deficits now? I can understand the argument for health care, (the spending for which won’t begin until 2014) even if I disagree with the necessity, but it seems to me that the majority of the stimulus is going simply to ensure that government union workers/voters do not have to share the pain that private sector workers have had to endure. Is that going to lead to a dividend of any kind? Or to higher expectations for even more government spending down the road? I know which way I’m betting.

    Mr. Ritholz, I understand your impatience with those Republicans who are just now whining about deficits when they stayed silent about the deficits that Bush ran…. I share your contempt. But you are forgetting that there were a whole bunch of us who opposed Bush’s “compassionate conservative” big spending as well…. Just not enough to matter when big spending “moderates” of both parties joined together with liberals at the trough.

    It is Obama’s misfortune to come along at a time when those same fickle moderates are starting to heed the Cassandras who have been decrying deficit spending and big government all along…. Even if we both know that they’ll jump back to the trough at the earliest opportunity.

  91. Petey Wheatstraw says:

    VRWC:

    “But you are forgetting that there were a whole bunch of us who opposed Bush’s “compassionate conservative” big spending as well.”
    ______________

    Funny, but I don’t recall ANY Republicans breaking ranks. I don’t recall any of them calling-out their own for such debacles as gay marriage and Teri Schiavo (for which the REPUBLICAN Congress convened a special session) either. I don’t recall any Republican but Ron Paul warning against the war war of choice that would allegedly pay for itself. I don’t recall them demanding that Dick Cheney answer for treason or for any of the other crime perpetrated by Bushco.

    I do remember IOKIYAR.

    As for joining liberals at the trough, please tell me which “liberals” are the beneficiaries of government largess to corporations.

    I’m no fan of Obama or the Democrats (except for Kucinich, Grayson and Feingold), but I know for certain exactly how we got here and who is responsible: The Republicans (except for Ron Paul, and that’s conditional because he’s a religious zealot).

  92. Thor says:

    Just three – that’s not bad at all considering.

    EmeInfo – You sound very very familiar!

  93. Equityval says:

    BR: I’m not sure where the WSJ gets its numbers, but Jim Bianco has a very different chart on the current size of the deficit. Unfortunately, I can’t get the chart to stick in the comment window. Obama makes Reagan look like a piker.

  94. VRWC says:

    Mr. Wheatstraw,

    My point is not to defend Republican elected officials, but to point out that there are lots of us “deficit hawks” out here among the rank and file who did not support Bush’s spending at the time and are not being hypocrites when we oppose Obama for the same thing now.

    The trough I am speaking about is the whole thing…. government union worker piggies as well as the corporate types.

    Not sure how you can say that no liberals are the beneficiaries of government largess to corporations with a straight face…. besides the union payoff are you saying there is no Goldman? No Fannie or Freddie? Wall Street and the banks give the biggest bucks to whoever is in power…. plenty of piggies on both sides…. I’d prefer to cut them all off.

  95. BTUR says:

    “Austrian economists are not = to political hacks.”

    Well, I can’t say I care much what Austrian economists think, but what I can say about Austerians is that they don’t seem to be looking carefully at the facts – that our current economic situation is a large factor in our budget deficit, that job creation is the biggest problem we’re facing, that businesses biggest problem is a lack of demand, that a lot of our debt (and other problems like our trade deficit) was from years past and there’s not much we can do about it in the short term right now, etc… ;)

    “More important, what is Obama buying with his deficits now? I can understand the argument for health care, (the spending for which won’t begin until 2014) even if I disagree with the necessity, but it seems to me that the majority of the stimulus is going simply to ensure that government union workers/voters do not have to share the pain that private sector workers have had to endure. Is that going to lead to a dividend of any kind? Or to higher expectations for even more government spending down the road? I know which way I’m betting.”

    There seems to be a large disconnect in your understanding of reality here. What is Obama buying with his deficits? Let’s look at some facts:

    http://voices.washingtonpost.com/ezra-klein/2010/06/budget_deficits_reflect_econom.html

    So…revenue lost from economic conditions account for almost half of the increased deficits we’re expecting going forward.

    48.5% of the budget goes to the Department of Defense, according to this:
    http://en.wikipedia.org/wiki/2010_United_States_federal_budget

    So, of course I’m not going to go over everything Obama is buying with his deficits, but that should paint a loud and clear picture where a large portion are coming from. A bad economy and a huge defense budget. As for your next point, that somehow he’s trying to shield public workers from what private workers are having to endure….you’re missing the point of stimulus. People need jobs to buy things. When people start buying things, the private sector benefits and can start hiring more employees. We have a $14+ trillion economy. You think $800B in stimulus funds (a number of which are tax cuts) are really meant to shield public sector employees from the pain private sector employees have to endure? On another note, clearly you don’t live in a state that’s been giving it’s employees mandatory furloughs. If you don’t like what’s been done to stimulate the economy, that’s one thing, but you’re just missing the point entirely. We need to create jobs for people. That’s the point.

  96. Joe Friday says:

    BR,

    * The national economy tanked after Reagan’s massive tax cuts for the Rich & Corporate were retroactively enacted late 1981:

    + 4.9 GDP > 3RD QTR ’81
    ~~~~
    – 4.9 GDP > 4TH QTR ‘81
    – 6.4 GDP > 1ST QTR ‘82
    + 2.2 GDP > 2ND QTR ‘82
    – 1.5 GDP > 3RD QTR ’82
    + 0.3 GDP > 4TH QTR ’82

    * The national economy only recovered after Reagan started increasing taxes late in 1982:

    + 5.1 GDP > 1ST QTR ’83
    + 9.3 GDP > 2ND QTR ’83
    + 8.1 GDP > 3RD QTR ’83
    + 8.5 GDP > 4TH QTR ‘83

    Your response to ‘hankest’ pointing this out upthread was:

    “The really big Reagan tax increase were in 1988 . . .”

    According to the U.S. Treasury Department, the ‘Tax Equity and Fiscal Responsibility Act’ that Reagan signed into law late in 1982 raised taxes by almost 1 percent of GDP, making it the largest peacetime tax increase in American history.

    Reagan signed tax increases every year from then onward.

  97. eightnine2718281828mu5 says:


    but also the collapse of the Soviet Union

    So we crushed the Communist Soviets with our might military buildup, but somehow the Chinese, with their much smaller economy, failed to succumb.

    You might consider an alternative interpretation:

    Gorbachev, not Reagan, brought and end to the Soviet system, because he believed it to be the best way forward for his citizens.

    Russian hope and civic optimism brought down the USSR, not fear of a few US aircraft carriers, and China remained Communist because there was no Chinese Gorbachev to bring down the system from the inside.

  98. Alaric says:

    Perhaps a significant contributing factor in the demise of the Soviet Union was historically cheap oil?

    Classic case of missmatched assets and liabilities: cheap oil = lower revenue for the CCCP while expenses, primarily in the form of defense spending, remained high…..

    Amusing that you never hear this clearly articulated.

  99. theorajones says:

    “Obama’s deficits are just like Reagan’s?…. really?”

    Obama’s deficits aren’t like Reagan’s. Obama’s contribution to the deficit is overwhelmingly the product of one piece of legislation: a deliberate, short-term, targeted, limited, bill that serves the clear purpose of providing a temporary stimulus to an economy in a crisis we haven’t seen since the 1930′s. The deficit created by Obama’s stimulus bill tax breaks & spending declines spectacularly in 2011 and is almost gone by 2012. And, it’s worth noting, the deficit impact of this bill from 2009-2011 is roughly comparable to than the deficit impact of the Bush tax cuts in those same years–and by 2012 and for every year onward, the deficit impact of the Bush tax cuts utterly dwarfs the impact of Obama’s stimulus spending. http://www.businessinsider.com/chart-of-the-day-bush-policies-deficits-2010-6

    On the other hand, the deficits created by Reagan were like Bush’s (though much smaller). They were structural and long-term, because they were things like open-ended increases to the military, and permanent tax cuts for upper earners. They come back every year unless you pass a new law to make them go away.

    There is a critical structural difference between the kind of legislation Republican presidents have passed for the past 3 decades and the kind of legislation Democratic presidents have passed for the past 3 decades, with the differences becoming more extreme over time. Look at health care: both Bush and Obama passed very large health care bills with a price tag in the hundreds of billions over 10 years (Bush’s was $550b, Obama’s $940b).

    But their respective health bills’ deficit impact is night and day. Over the first 10 years, Bush’s drug bill will add over $550 billion to the deficit. It will continue to add tens of billions to the deficit every year, and as medical inflation grows, this deficit impact will grow much faster than general inflation unless Congress takes action to stop it. Obama’s health care plan, on the other hand, will take $140 billion off the deficit in its first ten years. These deficit reductions, keyed to medical inflation, will grow unless Congress takes action to stop it.

    You would think people on a business blog would look past the spin and the slogans to the bottom-line fiscal impact of policies that were championed by different administrations. Cash flows aren’t determined by your rhetoric or your ideology–they are driven by the policies you implement.