Category Archives: Deficit

The Bush Legacy: America in Decline

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A few weeks ago, economists Martin Wolf and Robert Shiller appeared on Fareed Zakaria’s GPS on CNN.  They said, “It is now clear that the Obama team has helped avert a complete meltdown of our financial markets.  But they warned that one of the greatest dangers facing our nation is the growing economic disparity between the rich and the poor.”  They went on to say, “This could create a country in which not even those with a great deal of money will want to live.”

There are other troubling effects of Bush’s tax cuts for the wealthy, deregulation and the Republican Party’s stubborn adherence to trickle-down economics. 

Although he draws no conclusions relative to party politics, Rick Newman talks about warning signs of American decline in a story published by U.S. News & World Report.  In the story he states, “…real household income in America has flat-lined, which means many middle-class families are barely keeping up with inflation. The exploding federal deficit hamstrings the government’s ability to help. Healthcare is too expensive, America’s manufacturing base is eroding, and two open-ended foreign wars are draining the national treasury.”

Newman goes on to point out that the annual “prosperity index“ published by Legatum Institute, a London-based research firm, now ranks the U.S. as the ninth most prosperous country in the world.  The same study ranks the United States 27th for the health of its citizens, a statistic that is all the more disturbing given the fact that we spend far more on healthcare per person than any other nation.

According to Newman’s article, the U.S. poverty rate of 17 percent ranks third worst among advanced nations above only Turkey and Mexico.  And since our future depends on the education of our youth, there is more disturbing news.  American 15-year-olds score below average among advanced nations on math and science.

There is one glimmer of positive news:  Newman points out that, according to a GfK Roper survey of how nations are viewed by others, “America rocketed from No. 7 in 2008 to No. 1 in 2009, largely because the world cheered the election of Barack Obama as U.S. president.”

The cost of war.

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Our war in Afghanistan has now dragged on longer than the failed Soviet Union occupation.  And President Obama is faced with a decision to expand the war by adding up to 40 thousand new troops, engineering a withdrawal, or committing to something between those extremes. 

By all accounts, this was a war that could have ended several years ago if we hadn’t become preoccupied with Iraq.  But as the Iraq “liberation” dragged on, our real enemies in Afghanistan regrouped and gained in strength.  Now it seems that no option in Afghanistan is a “good” option – especially given our economic woes at home.

It was recently reported that the Afghan war has already cost nearly $230 billion.  It was also estimated that the war costs $500,000 (Pentagon estimate) to $1 million (Congressional estimate) to maintain one U.S. soldier in Afghanistan for one year.  That cost includes transportation, equipment, support facilities and all incidentals.  If those figures are correct, adding 40 thousand more troops to the conflict will cost the U.S. an additional $20-40 billion over the next year.   And given that we still have combat troops stationed in Germany and Japan more than 60 years after the end of WW II, the cost will likely continue for many years to come. 

Not included in that estimate is the cost of VA to treat lasting injuries and psychological damage.  There are also the sums paid to veterans for disabilities.   And, of course, it’s impossible to place a price on the lives lost in action.   

Add to these costs the price of the war in Iraq which some estimate to total more than $2 trillion.

All of this is background to the debate over health care reform and economic stimulus.  The economic stimulus package that was signed by President Obama included $787 billion to create or save jobs by rebuilding our nation’s infrastructure.  And the cost of health care reform bills being considered are estimated to  cost more than $800 billion over 10 years.  Of course, the conservatives are horrified by these numbers.

So they must be apoplectic over the cost of Bush’s wars?  Not exactly.   The conservatives can’t wait to send more troops to Afghanistan and spend more money (and more lives) on open-ended, no-bid contracts for the likes of Halliburton and Xe.  They even trotted out the dark one (former V.P., and former Halliburton CEO, Dick Cheney) to attack Obama for “dithering” over the decision to commit more troops. 

Conservative logic goes something like this:  It’s un-American and un-patriotic to spend our own money on our own citizens for jobs and health care.  But it’s absolutely necessary to spend trillions to kill a few knuckleheads on the other side of the globe. 

Does this make any sense?  I think you know the answer.

A simple plan for taking back our economy.

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It has been more than a year since Wall Street’s risky investments collapsed our economy.  Unfortunately, Congress still has not passed legislation to prevent such calamities in the future.  Instead of trying to craft new legislation, I suggest that Congress look to the past.  To wit:

1 – Reinstate, in its entirety, the Glass-Steagall Act.  The act created firewalls between commercial banks, investment banks and insurance companies following the Great Depression.  It was the unraveling of this act in 1994 that undoubtedly led to our current recession.

2 – Re-regulate derivatives to prevent highly risky investments resulting from the so-called “Enron exception.”  The “Enron exception” protected the company’s on-line commodity trading from federal regulation ultimately leading to Enron’s failure.  So, of course, Republicans couldn’t wait to expand the legislation which resulted in runaway crude oil prices and the housing-fueled financial collapse of 2008.

3 – Re-regulate banks by instituting a national usury law that would cap interest rates at 12 percent.   Prior to the Reagan-era deregulation, today’s interest rates would have resulted in prison sentences for loan sharking. 

4 – Restore the maximum income tax rates to pre-Bush levels.  Better yet, restore the maximum rates to pre-Reagan levels.  This could provide additional income to rebuild our infrastructure and/or reduce the national debt.

5 – Close tax code loopholes which encourage U.S. corporations to establish off-shore “headquarters” in order to avoid taxes.  At the very least, prevent such corporations from receiving government contracts.

6 – Use our anti-trust laws to break up any corporations deemed “too large to fail.”  If a company is so large that its failure would damage the nation’s economy, it automatically qualifies as a monopoly.

There is nothing new or Earth-shattering about any of these measures.  And that’s the point.  They have all been proven.  In fact, they kept our government and our businesses operating effectively for decades until Republicans undermined our nation’s economic security in order to deliver greater profits to their greedy corporate masters.

For our economy, let’s give credit where credit is due.

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The so-called teabaggers and wing nuts claim their attacks on President Obama aren’t the result of racism or ideology.  They say their demonstrations are about the national debt which they believe has increased to staggering new levels under the Obama administration. 

There are three flaws with their argument.  One is that the debt only really matters if we plan on selling our nation sometime soon.  Otherwise, it’s merely a number.  Second, while it’s true that the debt has reached an all time high in actual dollar amount, as a percent of GDP (gross domestic product) it has been higher before.  And third, very little of the current debt can be attributed to actions by President Obama.

Following the Great Depression and WWII, the national debt as a percent of GDP stood at 120 percent.  It steadily decreased each year until the election of Ronald Reagan in 1980.  Under Reagan the administration so overspent on military weapons that the national debt nearly tripled.  The debt continued to increase during the George H.W. Bush administration.  When Bill Clinton was elected President in 1992, he prioritized the economy and succeeded in significantly reducing the debt.  Then, under George W. Bush, the debt nearly doubled again until, by the time he left office, it had risen back to 80 percent of GDP.  (One has to wonder where the tea parties and town halls were then.)

In reality, the recent increase in our national debt is the result of two wars begun by the Bush administration (one based on false information) that have cost more than $2 trillion – a figure that doesn’t even include the cost of health care, disability compensation and death benefits for those who have served in these wars.  Contributing to the increase was the creation of the massive Homeland Security department by the Bush administration.   And, of course, the primary cause was Republican-led deregulation of banks and commodities resulting in runaway greed and wild speculation.  When the banks’ risky investments failed, the Federal Government was faced with a decision of bailing out those responsible for this mess.  Or letting the nation slide into a 2nd Great Depression. 

By the time of his inauguration, President Obama was facing the worst economy since Herbert Hoover.  And, like FDR, he has little choice but to try to create jobs through stimulus funds and loans.  Yet, despite having created this mess, Republicans have fought Obama at every opportunity.  Not a single Republican in the House voted for the stimulus package and all but three Republicans in the Senate voted against it. 

It appears they would rather make some sort of political statement than uphold their commitment to serve our nation. 

Republicans have also tried to block health care reform and the proposed cap on carbon dioxide emissions intended to head off more severe climate change.  (They wouldn’t want to interfere with the profits of our large corporations, would they?)

Perhaps the most absurd attack on President Obama is his trip to promote Chicago as host of the Olympics.  They claim that he should be spending more time in the Oval Office.  Hmmm, I wonder what they thought of Bush’s vacations while in office.  The final statistics show that “W” spent 977 days (33 percent) of his two terms on vacation, including the days immediately following Hurricane Katrina.

In my opinion, everyone needs to be more patient with this president.  Republican presidents had nearly 30 years to get us into this mess.  Let’s give President Obama more than 9 months to get us out of it.

Taking back our country.

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No, I didn’t suddenly become a pitchfork wielding right-wing lunatic.  I don’t own a handgun or an assault rifle.  And I have no doubts that President Obama was born in Hawaii.  But I do believe our nation is in jeopardy. 

However, we don’t need violence to address the issues.  All we need is legislation.  And it’s not even new legislation.  Just return the U.S. to the tax structure and regulations that existed in the U.S. prior to Ronald Reagan. 

Want to prevent another financial crash like the one that happened in 2008?  Simply eliminate the Gramm-Leach-Bliley Act of 1994.  That legislation, sponsored by a Republican-controlled Congress and signed into law by President Clinton, permitted bank holding companies to co-mingle financial institutions of deposit, investment and insurance which contributed to the collapse of our financial system last year.  You might also fire those in the Federal Reserve who failed to exercise the oversight that’s already within its power.

Want to eliminate the predatory tactics of the banks which issue credit cards?  Simply nationalize usury laws which limit interest rates in many states.  These laws were allowed to be circumvented in the 1980s by large bank holding companies. 

Want to reduce our national debt?  Simply return the highest marginal income tax to pre-Bush rates.   

Want to rebuild the nation’s failing infrastructure?  Return the highest marginal income tax to Eisenhower administration rates of the 1950s.  After all, that was the last era when our nation made significant investments in infrastructure.

Want to bring back manufacturing jobs and diminish unemployment?  Undo the relaxation of tariff laws that enabled “globalization” by our large corporations.  In reality, “globalization” is just another term for exporting jobs, undermining worker benefits and wages, increasing profits and avoiding corporate taxes.  (How many U.S. corporations have created a mailing address in the Bahamas or the Caymans to avoid U.S. taxes?)

Want to calm the angry rhetoric on radio and TV?  Reinstate the Fairness Doctrine which existed prior to 1987.  That doctrine, enforced by the FCC, required the holders of broadcast licenses to present controversial issues of public importance, and to do so in a manner that was honest, equitable and balanced.  (Wouldn’t you like to see Rush Limbaugh, Glenn Beck, Fox News Network and Focus on the Family try to justify their existence under those rules?)The point is most of the problems in this country aren’t new.  We’ve addressed them all before.  We can do it again.

Show us the money.

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When the housing market crashed bringing down the financial industry along with it (or was it the other way around?), trillions of dollars vanished.   The question is where did the money go?

The Federal Reserve along with the Bush administration started propping up the financial industry and the economy beginning in 2007.  Mostly this was done quietly with little to no media attention.  By the time President Obama was sworn in, taxpayers had already shelled out more than $3.46 trillion and the world economy was on the verge of collapse. 

Since Obama’s inauguration, the federal government has committed another $3.77 trillion in loans, bailout funds and stimulus spending to stave off what most economists concluded would be a 2nd Great Depression.   

And people are outraged!  Not at the ones who created this mess and originally hid it from the public.  But at the administration who inherited it.  That kind of logic could only be demonstrated by the likes of Glenn Beck, Rush Limbaugh and Dick Armey.   Where are their “Teabagger” demonstrations against CitiGroup, Bank of America, and Wells Fargo?  Where’s the right-wing fury for AIG?  Where are the posters calling Bush and Cheney Socialists and Communists for having allowed (or encouraged) this to happen?   

More important, where’s the money?

Of the $7.244 trillion total, $168 billion was mailed to taxpayers in the form of stimulus checks.  $787 billion is dedicated to stimulus spending on infrastructure and new jobs.  $275 billion is targeted at foreclosure relief.  And $15 billion is aimed at supporting small businesses. 

The rest of the money ($6.167 trillion) went to prop up the very institutions that created the mess.  For example, $234 billion went to CitiGroup, $137.5 billion to AIG, $118 billion to Bank of America and $29 billion went to Bear Stearns.   Another $700 billion was dedicated to the Troubled Asset Relief Program.  $1 trillion was set aside for the Term-Asset-Backed Securities Loan Facility to make it less risky for banks to lend money to businesses and consumers.  $720 billion was set aside to help banks remove toxic assets from their balance sheets.   Indeed, almost all the rest of the money has been allocated to help our banks recover from their own risky behavior.

And it has worked really well…for the banks.  Thanks to government aid, the CEOs, fund managers, and other financial executives are still able to afford new vacation homes, yachts and other “necessities” with their bonuses.  They’ve been able to raise fees on checking accounts and interest rates on credit cards.  And they’ve been able to return to the risky behavior that led to this mess in the first place.

Best of all, thanks to their lobbying efforts, paid for in large part by taxpayers’ money, they’ve so far been able to fend off serious regulation.