Krugman:
Part of this is unfair -- with the government running a surplus in the late 90s, it was inevitable that the next administration would offer some kind of tax break. But the vast majority of Krugman's calculus is spot on, and he doesn't even mention other expensive policies like Medicare D. It's been well-reported that the nearly $2 trillion deficit under Obama this year really has very little to do with Obama's policies (see this essential David Leonhardt piece). In fact, Obama's most criminal contribution to our deficit is his continuation of Bush policies, including tax cuts for households making under $250K and the ongoing wars in the Middle East.There were two big-ticket Bush policies. One was the tax cuts, which cost around $1.8 trillion in revenue; add in interest costs, and we're presumably talking about more than $2 trillion in debt. The other was the Iraq War, which has cost at least $700 billion, and will cost more before we finally extract ourselves.
Without these gratuitous drains on the budget, it seems fair to assert that we'd be coming into this economic crisis with a federal debt around 20 percent of GDP ($2.8 trillion) smaller than we are. And that, in turn, means that we'd be looking at projected net debt in 2019 of around 50 percent of GDP, not 70.
And that would definitely not be a scary number. Net federal debt was 49 percent of GDP in 1993, at the end of the Reagan-Bush years; Bill Clinton did move to reduce that number, and succeeded, but the nation wasn't facing imminent crisis.
Another way to look at this, as I wrote yesterday, is to ask: What would the long-term deficit look like under a President John McCain? The answer is: About 93 percent the same. The right way to rail on Obama's fiscal policy is to say he found the house and fire and hasn't produced a plan to extinguish it. But let's not pretend the guy in office for seven months lit the flame.
Instead of citing Krugman, why don't you just cite World Workers Daily?
The same reason you're not citing Stormfront, I'm guessing?
Well according to David Wessel in today's Wall Street Journal, it is now all Obama's problem and Bush is completely off the hook. After all Obama has been in office 8 months and has not balanced the budget, reduced unemployment, propped up the housing market, nor restored the stock market to its 2007 highs, thus repairing all of the wrecked 401K accounts. In addition, he is also losing the Iraq and Afganistan wars the Bush's surge had won.
It is time to modify the constitution so that a successful president like W. can serve unlimited terms without the nuisance of having to count ballots.
Here's my concern Mr. Thompson:
As a columnist/journalist, why breakdown one politician's policies to defend another? I get the point to breakdown and assess policies, but to couple that to defend another I don't feel is your role or at least what is core to your profession.
As a jounalist, wouldn't you better serve the public questioning all? In this case, debt is debt, deficits are deficits etc. Shouldn't the "questioning" be more towards how to balance deficits/budgets, control spending? Yes, I know, we're in recession govt needs to spend to climb out. Sure, I get that, but where it's spent and for what reasons it's spent in certain areas should be questioned and assessed.
Not defend.
I'm not even sure you would agree that wasteful and/or political spending by both parties helps contribute to debt/deficits. Let's go after that and serve your readers with that value proposition.
If you think bloggers shouldn't share their opinions then perhaps you shouldn't be reading blogs.
Blog or no blog doesn't matter. Thompson declares himself a media fellow and editor on bio on this site. He also claims himself a journalist on google. You can see that here:
http://www.google.com/profiles/dkthomp
If he does opinion, he should tell his readers. But he claims journalist which I assume he studied which covers abiding to no opinion and following journalistic ethics. You can find those here:
ANSE journalism code of ethics - http://www.asne.org/index.cfm?id=387
or:
Society Business editors and writers (he says he's a business writer/editor) http://www.asne.org/index.cfm?ID=4221
and:
Society Professional Journalists - http://www.spj.org/ethicscode.asp
Cite the Word Worker's Daily? Great idea! If only some brave Wobblies had been around to drag Junior Bush out of the White House!
Bush succeeded spectacularly in the old GOP aim of "starving the beast." He and his own national "tweed ring" sluiced trillions out of working class and middle class entitlements and effectively handed it to military contractors, banks, and the top 10 percent of what was once quaintly known as "ruling class." We don't quite get it yet, but that was our social security money Paulson handed to the financial speculators. It only awaits some political mathematics and deficit alarm to work it all out.
The aim of clawing back worker entitlements has been around since Bush's banker grandfather was mentioned in the rumored "rich man's plot" to launch a coup against FDR (See Congressional Record. Even the plausibility of rumors can tell you something about a person's character.) Thus Junior Bush not only avenged his father in Iraq, he avenged his grandfather in the Treasury Department.
After half a century, the rich finally got their money back. And who says Bush was a dumb rich kid and blundering moron? Such criticism fails to identify his constituency. As for the GOP's supposed demise. That has to have the private equity crowd laughing! Who cares who is president, just as long as the bond holders are holding hims on a very short leash.
Of course, you're right.
Just look at the BILLIONS spent to bail out Fannie Mae and Freddie Mac. You know, the two outfits that started the whole sub prime mortgage thing on a roll. The greedy financiers who led them even cooked the books, and then collected tens of millions in personal bonuses. They weren't even asked to give back their ill gotten bonuses. You know, people like former Clinton budget director Franklin Raines and former Clinton DOJ lawyer Jamie Gorelick.
How about some of the greedy capitalist pigs who got caught, like the Enron people? How about the crooked "economists" that functioned as advisors to these pigs - like paul Krugman?
Nice post, except you failed to mention the increased revenue which resulted from the people using their hard-earned money to further stimulate the economy.
http://www.treas.gov/press/releases/js3039.htm
Oops.
(Here's a chart from the treasury dept. for you if you prefer...)
http://www.treas.gov/press/releases/reports/revenue%20growth.jpg
If you are truly looking for the causes of this recession and decide to avoid the housing fiasco which was helped fueled by those such as Franklin Raines, etc... you are fooling yourself. Yes, that Franklin Raines which Obama made his chief economic advisor. Even after it was found that illegal and inaccurate accounting practices were used to fake "profits" in the companies.
Once these people that were getting loans they shouldn't have started having problems paying their bills, the cycle of lost revenue causing companies to lay off employes which in turn couldn't pay their own bills exploded.
Sorry for the run-on at that last sentence. I didn't have time to proofread it while at work. :(
The only alternative under consideration at the time of the Bush tax
cuts was to spend the money on social programs and infrastructure
projects, so it's hard to see how Krugman arrives at the conclusion
that if the projected surplus (which was going to disappear once the
internet bubble burst regardless) had been used for increased spending
instead of for tax cuts, the resulting debt would have been less.
I'm sorry, but were you asleep for the past 8 years? Bush's tax cuts were an ongoing phenomenon not a one shot deal. So taxes continued to be cut after the terrorist attacks and the invasion of Iraq and the action in Afganistan. So the money would have been spent on GOP programs, not social programs. The GOP slashed revenues, which never recovered and never created economic growth, and then went on a spending spree. Why do you people keep trying to defend the indefensible?
Generally speaking, a change in the tax rates--a tax cut--changes
that rates at which taxes are assessed in all subsequent years.
There was only one broad change in tax rates passed during the
Bush administration, in 2001. Similarly, most spending bills
of the sort being considered as alternatives to the tax cuts
create a budget line for funding the programs in future years.
Either was, Congress was going to spend anticipated surpluses
that were not going to materialize; nobody was proposing not
spending the surplus, except perhaps in some Krugman fantasy.
Whenever I'm commenting on the Atlantic, I make an extra effort to check the source upon which I base my assertions. Sometimes it's to avoid the commenters that love responding "Fox news! Bias! Bias!" and write off the rest of the argument immediately, but mostly it's because there are biases, they are often evident in Fox reporting or WSJ op-eds (although I think op-eds are supposed to be somewhat biased), and I prefer neutral sources to strengthen my argument. Citing Krugman is not citing a neutral source. I respect his accomplishments, education, and intelligence, but he does not consider US economics neutrally. If you want to bring attention to his articles, please present both sides, rather than fall into the trap of repeating obviously shallow things like "Bush tax cuts cost 2 billion after inflation!", perhaps you could consider what the effect of those tax cuts were, as BDRealist does. Krugman is worse because he knows the effects and purposely leaves them out of his analysis, but we know that about him, which is why any of his articles need to be critically analyzed before being cited.
the real estate mortgage problem really helped to bring the US into the current financial crisis on top of the cost of the war. Dems BarneyFrank and Dodd helped several years ago to stop the Bush Administration from putting restaints on Fannie and Freddie. Of course those 2 dems made millions because of Fannie and Freddie. Obama has continued to show how great a campaigner and speaker he is but as a leader(big time buyers remorse), the trillion dollar budget which was so full of pork was passed while he is president. He spends, spends and spends---I'm starting think our country will have to soon be called the United States of China.
Had Gore been elected instead of Bush in 2000, Gore would have posted deficits too. Deficits have been the rule, not the exception, in the post war period. Even the Clinton administration was surprised by its temporary surplus, which was fueled by the unprecedented dot-com bubble.
What's new with Obama is the sheer scale of these deficits.
To the above commentators.
Fannie and Freddie are only part of the cause of the mortgage meltdown.
To subscribe to the idea that the GSEs were the main force behind the fiasco is a classic political misdirection designed to provide conservative people with a short ready made answer that stops all further questions which might contradict their ideological worldview.
Some other keyplayers:
1- Phill Gramm and the deregulation of the banking industry
2- the private mortgage companies and their NINJA loans
3- loose money Greenspan federal reserve
4- the ratings agencies failure to rate properly
5- AIGs use of options as a gambling devise rather than hedging devise.
The best book on this subject is Barry Ritholtz's Bailout Nation.
I certainly agree it isn't the only point. I was only trying to say that Bush' tax cuts and war weren't the only cause either, as seems to have been suggested by Krugman. My problem with the article & with Krugman is that, as an economist, he should know that looking back and saying "If Bush hadn't spent this money, we would have it today" without acknowledging the huge array of factors interlocked with Bush' actions is purposefully misleading. Krugman is frequently misleading this way, because he is politically biased, and with articles like these seems to be inferring that fiscal conservatives shouldn't be able to whine about the deficit because, if Bush hadn't done X & Y, Obama's actions would have resulted in a much lower deficit. Bush did do X & Y, Obama's legislation is costing a lot, and the deficit is worthy of consideration and concern, regardless of what went on before he got here.
Blaming Freddie Mac and Fannie Mae for the financial/credit/housing crisis is an old canard that seemingly can't be debunked enough. The idea that "[t]he housing bubble that burst in 2007 and led to a financial crisis can be traced back to federal government intervention in the U.S. housing market intended to help provide homeownership opportunities for more Americans," as Rep. Darrel Issa (R) recent report began, is pure spin. 75% of all subprime loans made between 2004 and 2007 came from lenders exempt from the CRA. New Century made > 50% of these loans and was exempt. Countrywide and similar regulator lenders contributed another 25% and were also exempt. Prime bubble and foreclosure areas like Florida (condos) and Southern California (bedroom suburbs) were hardly impacted by the CRA b/c most loans weren't subprime. Foreclosures are lower in CRA areas than in non-CRA areas. The majority of closed banks are not covered by CRA regulation.
What this thesis and the above report attempt to do is ignore the impact of deregulation, the rise of the securitization market and the preponderance of greed on the parts of buyers, mortgage originators, banks, and investors. We, as a country, buy/borrow/spend too much. And now we're paying the price. The causes are largely non-partisan.
I think you're confused; tax rates were cut once, in 2001, and under the terms of the bill passed the new rates were to remain in effect
until the bill expired in 2011. No further broad tax cuts were passed. Had new spending programs been instituted instead of cutting tax rates, funding for those programs would also have continued in subsequent years. Either way, Congress was going to spend projected surpluses that weren't going to materialize--because the surplus projections anticipated GDP growth at dot com bubble rates for the rest of the decade--and that was going to increase federal debt.
Here's an interesting breakdown of the deficit and who's responsible:
http://www.americanprogress.org/issues/2009/08/deficit_numbers.html