Tuesday, May 12, 2009

GOP's outcry over deficits disingenuous

By Jay Bookman of the AJC:

Republicans in Congress and on the TV and radio talk shows claim to oppose the economic stimulus out of concern about the national debt and a moral conviction that we should not saddle future generations of Americans with such a burden.

But who do they think they're fooling? Apparently they believe the world began anew at noon on Jan. 20, and that everything that occurred prior to that date had somehow been wiped clean from the national memory banks.

Well, it hasn't.

We do face a long-term problem. Our gross federal debt is at $10.6 trillion, with a good portion owed to lenders in China, Japan and the Middle East. But how did that number get so huge?

Well, of that $10.6 trillion debt —- a figure that accumulated over more than 225 years —- a shocking $8.35 trillion was racked up during the presidencies of Ronald Reagan, George Bush and George W. Bush. And much as their apologists pretend otherwise, those numbers can't be blamed mostly on Congress. During the Reagan era, for example, final budgets approved year after year totaled almost exactly what Reagan had requested.

Now, raw numbers can admittedly be misleading. A more accurate way to gauge how much a president has contributed to the problem is to measure debt against the size of the national economy. If the economy grew a lot, debt could grow as well without creating a problem.

Under Jimmy Carter, debt declined as a percentage of gross domestic product, falling to 32.6 percent, its lowest in 50 years. Then came Reagan. By the time "the Gipper" left office, the debt had almost tripled in raw numbers; as a percentage of GDP, it soared to 53.1 percent, and it rose still further, to 66.2 percent, under the first President Bush.

And of course, the same congressional Republicans now preaching the dangers of deficit spending were right at Bush's side, writing and passing the budgets that drove us deeply into the red.

That's why tax cuts are not the solution. In this economy, tax refunds would be treated in the same manner as a lottery win or small inheritance; most people wouldn't spend it, they'd use it to bolster their financial defenses. And that's as true for businesses as for individuals. Most companies wouldn't use new cash to invest in a factory or hire workers; they'd sit on it.

When consumers won't consume and investors won't invest, only government can step in to buy trucks and military equipment, and build roads and transit, and by doing so create demand for labor and material. That's just a hard economic reality.

Here's another one: For most of the past 30 years, huge deficits were not a necessity, yet under GOP leadership we incurred them anyway. With deficits now a necessary evil, this is not the time for them to try to reclaim their inner cheapskate.

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