Past v. Future

I watched a clip featuring Bill Maher from an appearance on the Lawrence O'Donnell show on MSNBC. I find I agree with him far more often than not and this time was no exception. He made a specific statement that struck me. While talking about the debt ceiling negotiations he noted it's stupid to lump the debt limit with budget deals because the debt ceiling is about the past and the budget is about the future. This seems to nail the issue rather well.

Few will argue that our past spending habits as a nation were flawed, to say the least. Too many short-sighted decisions, most of them completely unaccounted for in the budget, have piled up a tremendous amount of national debt. Some expenditures may well have been necessary, but many were not. Put simply, it was just easier to put it on credit than to bother adjusting our budget to pay for it. Don't get me wrong, there are times when you have to do that, but they should not be that common. So now our debt is in the $14 Trillion range and projected budget deficits are still way into the red. This has to not only stop, but we have to put some plans into place to begin paying down the national debt to a more manageable level. But let's be clear, the debt is the past. Debt: "Something, typically money, that is owed or due." Past-tense. The money is spent, the clothes have been worn and the food has been eaten. No amount of whining, moaning or cuts to current spending will change that. If we didn't spend one more penny on new expenditures, we would still owe $14 Trillion. So let's stop fighting about the balance of our current debt. We owe the money and we have to pay it back, honoring our prior commitments. So let's just raise the limit on a clean, no frills bill and move onto the next crisis!

Where the real debate should be taking place is with the federal budget. This is about future spending and has no place in a debt ceiling debate. This is the messy part. It would be nice if we could debate it without all the partisan crap that has brought the sticky gears of Congress to near standstill. We really do have to look at everything, including the military, Social Security, Medicare/Medicaid, federal agencies and programs. But this needs to be done with a scalpel, not a hatchet. We want the patient to make a full recovery, not require prosthetics and plastic surgery!

We didn't get into this mess in a single decade, so we ain't getting out of it overnight. We need to approach the problem of the national debt and the budget deficits calmly and rationally. All sides must be willing to give a little. That means looking at entitlement programs for any possible savings without cutting benefits, such as raising the retirement age a few years. It means closing stupid loopholes in the tax code that allow highly profitable companies and fund managers to get special breaks that have no purpose other than to make them richer. It means looking at the military budget, especially drawing down the wars and reducing permanent overseas bases. It also means killing the unpaid for Bush era tax cuts for the wealthy.

I admit I'm not optimistic because these days there seem to be so few reasonable people in Congress. Especially after the November 2010 election debacle which ushered in a wave of uber-conservative politicians who seem to be completely out of touch with reality. Look, we've wasted months arguing about this and accomplished nothing. The debate has even managed to fracture the Republican party itself. The Republican Speaker of the House can't even get his own bills passed without days of delayed votes and arm twisting. And worse yet, he wasted all that time and effort on a bill that was never going to pass the Senate! Bottom line, we have to pay our bills, and meet our obligations, so raise the debt limit with no strings. The budget must be addressed, but not like this. Not in the last seconds before the car goes over the cliff. Stop risking a full blown depression for political leverage!

The Wrong Problem

America has a bunch of pressing problems. We have unemployment topping 9.2%, the national debt at around $14 Trillion, budget deficits pushing a Trillion per year and an economy that may have climbed out of the hole, but remains prostrate and panting in the dirt. Now one of these problems is key to solving all the others. No, it's not the budget deficits or the debt itself. It's the economy! As long as the economy is immobile we cannot solve any of the others.

It's easy to try and compare the federal government's budget to a business or an individual's finances, but it's also nonsensical to do so because there are significant differences. If you and I get into debt, our main options are to cut our spending or increase our income by getting a better or second job. Or better yet, both. So far so good, but here is where the paths diverge. For you and I, this is pretty much all we need to do, since we are only responsible for ourselves and immediate family. The federal government, however, must balance the needs of the country and the complex interplay of finances, services and policies that affect the entire US economy. Every cut you make ripples outward across the country and sometimes even beyond our borders. Now when the economy is cruising along, these ripples are fairly easily absorbed with minimal shock. But the more fragile the economy the harder it is for the system to ride out the spikes and dips caused by large changes in federal fiscal policy.

The thing that gets lost in the brain bleeding cacophony of the budget fight and debt 'negotiations', and I use that term loosely, is that none of this happens in isolation. It's all connected. When the economy is bad and the unemployment rate is high, as it is now, it's a bad idea to start cutting federal and state jobs like a madman. This only makes the problem worse by reducing the total jobs available and increasing those looking for work. Conservatives like to pretend that government jobs aren't 'real' jobs, but that's just part of the 'government is bad' propaganda they like to spew. These are real people doing real work. So while cutting government programs, and thus public sector jobs, will indeed reduce overhead costs what's forgotten is that this only takes them off the government payroll and puts them on unemployment. This means more people drawing unemployment checks and more people flooding the job market. So really, you're just moving them from one government ledger to another. Their drop in income will lead directly to more bankruptcies and more foreclosures. This also leads to less consumer buying and thus more pressure on companies who are seeing their sales of goods and services continue to slide. Inevitably this leads to more layoffs as companies hunker down to ride out the storm. Oh, and let's not forget that people out of work and not buying equals less tax money being collected, which makes federal and state budgets even worse! It's a very logical and vicious downward spiral that is often completely ignored in the press and on the Sunday talk show circuit. Partly because it's an inconvenient hiccup to the Conservative narrative and partly because it doesn't fit into a one sentence sound byte.

Yes, we have lots of problems and the debt is certainly one of them. But while it is a problem, it is not THE problem. The debt is not going to destroy anything today, tomorrow or next year. However, not getting the economy moving and getting people back to work only makes the debt issue more intractable and increases pressure on future deficits. None of this should be surprising. This is simple economics. Just basic cause & effect that anyone willing to use that ten pound lump on their shoulders should be able to work out. We don't need more anti-abortion laws or any of the hundreds of other things the GOP controlled House has wasted time on this year! What we need is action to resurrect our economy before it stumbles back into the abyss from whence it came!

Priorities

We've all been in the position where we had multiple problems but limited time or resources to address them. So what do you do? You look at your problems and figure out which is the most pressing. The one that absolutely can't be put off. The problem that threatens to overwhelm you if not dealt with as soon as possible. You may have several that at first glance seem equally important but, in almost every case, when you look closely and weigh the facts you will see that one is more of an emergency than the other. It may not be by a lot, but there is a difference. Once this is sorted out, you focus as much as you can on this one problem and resolve it, or at least make enough progress that you can set it aside in favor of a more pressing issue. Put simply, you prioritize.

This is what we all do everyday. We prioritize errands, bills, obligations and all the other things in life we have to address both good and bad. But as often seems to be the case, our elected leaders appear to have forgotten this, whether by intention or incompetence. I think most Americans would agree that the two most pressing problems, on a national level, are the economy, which includes unemployment, and the national debt. Since being swept into office last November on a wave of impatience and discontent, the Republicans have, between inexplicable bouts of anti-abortion and anti-union zeal, screamed to the rafters that we must cut spending. Cut, cut, cut. Now, now, now! They say the government is spending too much and while true this is hardly different from the previous eight years, when they were in charge.  I agree that the debt is a huge problem. One of my early posts from 2004 was about the need to address the problem. Of course then the problem was only dire. It hadn't yet reached the level of obscenity we now face. So I'm fully in agreement that the debt must be faced and a plan set in place to reduce it.

However, one other thing has changed since 2004, when I first waved the red flag on our debt. You may even have noticed it when it occurred. It was when the economy dropped through the floor like a tank on balsa wood. Ring any bells? So here we sit, with unemployment hovering around 9% nationally and far worse in some areas. We've had some marginal growth, but it's been stuttering and uncertain. Foreclosures and bankruptcies are at eye watering levels. In fact, the only people doing well are those who either had lots of money to cushion the fall or the robber barons who parked the tank there in the first place! To top it all off, Republicans, with misguided and grudging Democratic support, ladled another $700 billion to the debt over the next few years so the richest people in the nation wouldn't see a slight tax hike.

This complicates any plan to balance the budget and put even a smudge on the national debt. It's the same old story, when the economy is booming and we could actually afford to reduce the budget and make inroads against the debt without major cuts, everyone wants to spend, spend, spend. As soon as the economy sags, everyone is suddenly calling for the end to NPR funding and home heating oil subsidies for the poor. Aside from the questionable morals of taking aid away from the poor after ensuring the wealthy don't see a tax increase, there is the fact that cuts like these have no real effect on the budget. Most of the cuts I see proposed are all focused on balancing the budget from the tiniest slice of the whole pie, discretionary spending. They ignore the largest percentage made up of Social Security, Medicare/Medicaid & Defense. Why? Because those would require real effort and debate. So much easier to just go for the easy pickings. The stuff you can get the base riled up about, but that won't really make a difference.

Want to deal with the budget? Focus on the economy! The most important thing is to get the economy growing and get millions back to work. That will scale back the bankruptcies, the foreclosures and spending on unemployment benefits. It will also generate revenue that can be used to balance the budget, along with some modest cuts. Remember, the underlying reason for the huge budget problems at the State and Federal levels stem from the recession. Yes, government has spent a lot in the last 3 years, but the reason it did, whether you agreed with the choices or not, was in direct response to economic strife. Propping up huge corporations so they wouldn't collapse and take large chunks of their fiscal neighbors with them. Trying to pump money into the system to keep the economy from flat lining. That's where the majority of our recent deficits came from. So focus on the economy. Get that running on all cylinders again and a significant percentage of the problem will correct itself.  No, it won't solve it, but it will have a far greater and long lasting effect than any discretionary spending cuts. And if you're going to look at cuts, consider EVERYTHING, not just your pet, partisan punching bag. We will never balance the entire budget if we are only willing to make cuts to 15% of it!

Fiscal Reality

The conventional wisdom is that one of the most important planks in the Republican platform is 'Fiscal Conservatism'. In other words, the idea is keeping the government's purse strings pulled tight whenever possible and limit spending for non essential items.  Sounds like a good idea, doesn't it? I would have to say that I like the sentiment. I'm sure I wouldn't agree with everyone else on what's essential, but that's its own issue. The point is that Republicans and Conservatives in general are always harping on about fiscal restraint. Conversely, we are also told that Democrats like to spend and spend freely. Ask just about anyone and they'll tell you that Democrats are the spenders and Republicans are the party of fiscal restraint. What makes it so inconvenient is that it's not true.

First let's look at history. The previous five Presidential Administrations all increased the national debt, which probably surprises no one. But you might be surprised by how much each Administration contributed to our current debt. The Republicans' mythological hero, Ronald Reagan ballooned the national debt by 189% in his eight years in office, making him by far the biggest spender. Next on the list is another Republican, George W. Bush who increased the debt by 89% in his eight years. You're probably thinking that Clinton must be next, as the only other eight year Administration, right? Well, as a matter of fact, you would be wrong. George H. W. Bush takes the number three spot with a 55% increase in his four years in the White House. Number four is Jimmy Carter having added 42% in four years. That's right, William Jefferson Clinton, after eight years only added 36% to the national debt. He even managed to run a budget surplus towards the end of his second term. So here we have five Presidential Administrations and all three Republicans outspent the two Democratic Administrations. On top of that, the Clinton White House presided over the most fiscally responsible spending despite being reviled by Republicans. I realize that this simplifies the financial details of these administrations, yet it's hard not to see a fundamental hypocrisy from the 'Fiscal Conservatives' on the right.

Today the deficit is a major issue to the country, but has become the very raison d'être for the Conservative movement. In fact, since March of this year it has been a grueling fight to get unemployment extensions passed in the Senate as Republicans thump their chests and demand that they be paid for in the budget before they can be passed. On the surface this sounds somewhat reasonable. But as far as I can tell, emergency measures like these have historically never been paid for up front. That's probably because they are needed due to an . . . emergency. Another thing to realize, despite several prominent Republicans' moralistic babbling, is that unemployment benefits in a deep recession like we have now are just about the most direct form of economic stimulus possible. You are putting desperately needed money into the hands of people who will spend just about all of it back into the economy immediately. This prevents even more foreclosures, car repossessions and loan defaults by people on the edge. You keep people in their apartments rather than pushing them onto the streets to become an even bigger issue for the nation. But the steady thrum of Republicans chanting 'deficit, deficit, deficit' drowns out these obvious facts. What is really infuriating is that during lulls in the unemployment extension arguments, the same Conservatives who decried unpaid for benefits are calling for extending Bush era tax cuts for those who are least affected by the recession. Incidentally, both rounds of tax cuts pushed through by the Bush Administration and Republicans in Congress were, wait for it . . . UN-paid for. I wish I was surprised by the hypocrisy but for good or ill I'm getting a little numb to it after the last decade. The logic, if you'll allow me to demean the term for a moment, given is that tax cuts will pay for themselves. I'm serious, that's the idea. Worse yet, some people with functioning brains actually believe it. Oh, I'm not saying that in the long term the cuts may not have some positive effects that could make back a percentage of the original cuts. But tax cuts that pay for themselves are about as viable as the mythic perpetual motion machine. It might make sense four hours into a Friday night bar crawl, but in the sober light of day it's complete drivel.

The reality is that, based on past performance, Republicans seem incapable of walking the walk once they get power. They will talk up fiscal responsibility all day long and deep into the night, but their actions continually underscore a complete lack of interest in the subject. It's a hollow, empty charade for most of them. They are on full volume now because the debt is an issue after the 8 years of wars and tax cuts under Bush and the necessity of heavy spending to try and stabilize the economy immediately after Obama took office. I won't deny that the debt is a major issue. In fact I posted a piece about the need to deal with the national debt back around the end of Bush's first term. The complicating factor is that now, in the midst of a dodgy recovery from the biggest financial disaster in 80 years, is not the time to start slashing and cutting spending. Why? Because the economy is teetering on the edge and right now the Federal government is the only entity ready and willing to pump money into the economy.  The banks have somewhat recovered but are sitting tight on their cash until the economy revives. Kind of a Catch-22 for them. Banks won't lend until the economy stabilizes but the economy is having trouble stabilizing due to a lack of credit available. You see if we cut now then the States, who are already struggling to find money just to pay school teachers, will be thrown to the sharks, not to mention most any cuts of significance would result in adding more names to the already endless seeming unemployment lists. Here's where a healthy sense of irony comes in. The best time to make strides on the national debt is when the economy is doing well. That's when States are making ends meet and have some leeway in how they manage their budgets. That's when tax revenues are high because individuals and companies are buying and spending freely. That's when foreclosure and bankruptcy rates are low. That's when the banking system is flush with cash and eager to lend. That's also when politicians are least likely to cut programs and trim fiscal fat. It's when the American public is blissfully unconcerned about the debt because everything is going so darn well.

I have never claimed, and never will, that I'm a financial expert. But the most important item on the nation's agenda at this moment is stimulating the economy to spur new job creation. That's job numero uno. And that's not going to be accomplished by renewing tax cuts for the wealthiest Americans or by the Republicans' myopic plan of 'tax cuts fix everything'. No single thing is going to magically resurrect the economy. It will take targeted tax incentives, aggressive, focused spending, loosened credit markets and consumer confidence to get the nation back on its feet. This includes extended unemployment, in the short term, to provide some minimal support for those who are the most obvious victims of the collapse. Let me remind you that to be eligible for unemployment benefits a person had to have lost their job through no fault of their own. These people are not dead-beats as some pathetic politicians and pundits like to portray them. They were laid off because the economy tanked and business dried up, not because they quit or were fired. We can't ignore the ballooning debt, but we can't let it paralyze us from doing what's needed to restart the economy either. Unfortunately no single thing will get the national debt under control. Dealing with debt is like losing weight. It can't be done overnight and it's going to require long term changes and willpower.  Where it gets tough is when the recovery is complete, the storm clouds part and the sun returns. That's when we need that fervor to attack the problem because it's always more difficult to focus on cuts and and spending reductions when the cash is flowing. America must be ready and willing to demand action on the debt when we have the resources to do so and not fall back into spending it as fast as we get it. As a nation we are so fond of declaring wars on things, so why not a War on Debt? Not only would that be a winnable war, but one with concrete benefits for Americas future. When we've climbed out of this recession, let's focus on reducing government spending through cuts and changing the way we do things. For one thing, let's reduce our military commitments overseas. I'm not just talking about Iraq and Afghanistan, though to be sure both of these wars are costing us dearly. We don't need 50,000 troops in Germany anymore. We don't need tens of thousands in Japan or most of the other countries where we continue to maintain huge active duty forces. Most of these Cold War era military commitments are no longer needed. I'm not saying we should pull out everyone from everywhere, but there is no reason for the manpower commitments we currently maintain. America is capable of dealing with the financial crisis and then paying down the debt. What we have, up to this moment, been sorely lacking is the will to do so.