Tuesday, September 11, 2007

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Did I miss something to obsess about?

Today I received an e-mail from the folks at Democracy: A Journal of Ideas imploring me to check out Bernard Schwartz and Sherle Schwenninger's article, "Public Investment Works." The one-sentence summary of the argument:

BLS Chairman Bernard Schwartz and New America Foundation Senior Fellow Sherle Schwenninger posit that in an age of decaying infrastructure and failing schools, we can - and must - eschew our obsession with balanced budgets and find ways to make smart public-works investments. (emphasis added)
Um.... how do I put this.... was I in a coma when this obsession gripped the country?

President Bush and most of the Republican members of Congress haven't cared much about balanced budgets for some time.

As for the Democrats, in this century,* the only griping about fiscal rectitude came during the first term of the Bush administration, mostly as a way to attack Bush's fiscal policy. During the second term, I keep reading folks like Paul Krugman articulate the exact same set of talking points as Schwartz and Schwenninger.

What does someone like Hillary Clinton -- whome one would assume to be closest in spirit to her husband's legacy -- think about this? Let's go to her economic speech from last year:

We can return to fiscal discipline. We can invest in infrastructure, research and education, jump start a smarter energy future, promote manufacturing, rein in healthcare costs. And we can do it in ways that renew the basic bargain with America's middle class.
There's certainly a nod to fiscal discipline -- but she seems way more keen on those infrastructure investments to me.

Seriously, has anyone out there been obsessed about reducing the deficit in recent years?

*It's certainly true that, way, way back in the nineties, key parts of Clinton's team were fiscal hawks. Even then, however, folks like Bob Reich were hell-bent on infrastructure investments.

UPDATE: Ah, I see the problem now -- I'm "too knowledgeable". Truly an unusual problem for your humble blogger.

posted by Dan on 09.11.07 at 03:42 PM


*It's certainly true that, way, way back in the nineties, key parts of Clinton's team were fiscal hawks. Even then, however, folks like Bob Reich were hell-bent on infrastructure investments.

Do you have any recollection about who won and who lost the fight in the Clinton administration about whether the administration would fight for deficit reduction or an infrastructure investment stimulus package? In particular, do you have any recollection as to whether Robert Reich wrote a critical memoir of the Clinton administration called Locked In The Cabinet in which he joked that he hopes to come back as the bond market in his next life so that he gets whatever he wants?

Do you have any recollection as to whether Democrats took any political risks in the early 90s for the purpose of deficit reduction? Does the name Marjorie Margolies-Mezvinsky ("Bye-bye, Margie") ring a bell?

This all actually happened. You really ought to remember it.

posted by: alkali on 09.11.07 at 03:42 PM [permalink]

As Vice President Cheney said, Reagan proved that deficits do not matter.

So why should we worry about the Medicare and other obligations. the republicans have demonstrated that we can finance them with tax cuts.

What is good for the gander can also be good for the goose.

so it looks like starve the beast is going to be as big a policy failure as invading Iraq.

posted by: spencer on 09.11.07 at 03:42 PM [permalink]

Dan's got Reich mixed up with Rubin. Everybody does that.

posted by: Paul Zrimsek on 09.11.07 at 03:42 PM [permalink]

Or is he contrasting Rubin with Reich? In which case, never mind.

The Clinton administration did nobly restrain itself from blowing a lot of money on new spending programs-- in the same sense that I've nobly restrained myself from cheating on my girlfriend with Salma Hayek.

posted by: Paul Zrimsek on 09.11.07 at 03:42 PM [permalink]

Ross Perot?

posted by: Jim Hu on 09.11.07 at 03:42 PM [permalink]

I do notice something that perhaps an economist could explain.
Why would Cheney run up such great profits and then pull them offshore unless he expected that the Great American War Profiteering Ripoff would destroy the currency used as the mainstay of international finance ?
And if that is valid - the humbling of America - who is to benefit ?

posted by: opit on 09.11.07 at 03:42 PM [permalink]

I don't understand. If there were budget surpluses and controlled spending during the Clinton years, then why did the national debt increase by $1.5 trillion from $4.167 trillion to $5.662 trillion?

posted by: bluhawkk on 09.11.07 at 03:42 PM [permalink]

The national debt increased under Clinton because Clinton inherited a budget that was out of balance. During the Clinton years, federal spending grew at an average rate of 1.5% per year after inflation, which was slower than the growth of the economy and (more important for the purposes of this discussion), slower than the growth of federal revenues. As a result, the deficits gradually decreased during the Clinton years and the budget eventually went into surplus.

Then Bush came into office, cut taxes, and increased spending. During Bush's first term, spending grew at 4.6% per year after inflation. According to White House spokesman Tony Fratto, as quoted in today's New York Times, that level of growth was what Bush wanted: "The Republican leadership in the House and the Senate kept to our top number."

As a result of the Bush policies, the national debt today is $9.016 billion. That's a $3.3 billion increase during Bush's time in office.

posted by: Kenneth Almquist on 09.11.07 at 03:42 PM [permalink]

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