The Republican’s Debt and Deficit Blackmail

Tuesday, December 18th, 2012
GOP blackmail

(By The Pragmatic Pundit)

Republicans have been using debt and deficit blackmail as a bargaining strategy since the days of Ronald Reagan.Reagan’s brand of politics was successful at promoting the notion that federal government spending on social programs is mostly wasted on pointless handouts to lazy recipients. He carefully cultivated the impression that “government spending” meant “free money” for people who were nothing more than moochers.  Sound familiar?

Ronald Reagan was swept into office on the same Republican fearmongering-propaganda that grips the country today…”spending is out of control, the country is going bankrupt and government is too big.”

There is no denying Reagan inherited an economy that was in a deep recession, but his response to the debt crisis was far different than Republicans would have us believe.

Despite his “small government” rhetoric, Reagan expanded the federal government by 7%, employing a larger federal workforce (those greedy public employees) than any President in history other than Johnson who presided over the Vietnam War.

He did enact a huge tax cut, but then raised taxes eleven times; increased defense spending; ballooned the federal deficit to the largest peacetime deficit in history; raised the debt ceiling 17 times and accumulated a debt burden that equaled the previous 200 years of American history, turning the United States from a creditor nation into a debtor nation.  For the first time in the history of the nation, the United States borrowed in order to cover federal budget deficits.

David Stockman, Reagan’s economic wizard and the architect of the trickle-down budgets wrote:

“The Reagan deficits were intentional, designed to cut revenue as a way of pressuring Congress to cut programs Republicans wanted to destroy….The plan… was to have a strategic deficit that would give you an argument for cutting back the programs that weren’t desired….”

The “small government” mantra and “debt and deficit” narrative continued after Reagan left office and another Republican, Bush (41)  took the helm.

Daily News 1990:  Legislators Say There’s No Money.

During the tenure of these two Republicans, deregulation and imprudent real estate lending contributed to a Savings and Loan crisis and quite possibly the stock market crash.  Between 1980 and 1994, more than 1600 banks were closed or received financial assistance from the FDIC.  Over 1,000 banks with total assets of over $500 billion failed.  The number of savings and loans declined from 3,234 to 1,645.Taxpayers assumed the bill for a $124 billion bailout, while corporate scandals and bankruptcies made matters worse. Enron represented the biggest corporate scandal in history, while Worldcom MCI filed the largest bankruptcy in history.

That was the economy Republicans left for Bill Clinton and they were singing the same song: “spending is out of control and the country is going bankrupt.”  
CNN – 1995
Americans blame GOP for budget mess

Buffalo News 1995

Then as now, Republicans focused solely on cutting the social safety net and entitlement programs.  Remember welfare reform?  Republicans take credit for Clinton’s 1993 deficit-cutting package, but the truth is the balanced budget passed without a single GOP vote in either house of Congress.   By the time Clinton left office, there was a surplus.Bush/Cheney inherited the Clinton budget surplus and immediately began turning it into a deficit.

Despite their opposition to entitlements, Republicans passed the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 expanding the program (can’t privatize it, figure other ways for private corporations to extract money from the program).  After being debated and negotiated for several months, the bill finally came to a vote  on a November morning at 3 am while America slept.  Among other things, the bill prohibits the federal government from negotiating discounts with drug companies.  Read the curious legislative history.

Bush launched wars with Iraq and Afghanistan and introduced tax-cuts that primarily benefited the rich.  None of these expenditures were offset and they all were kept off the books, giving the illusion that the country was in a much stronger fiscal position than it was.  Republicans admit under Bush they  “spent like drunken sailors”,   but when the spending was taking place, not a single Republican rebelled.  Remember, running up debt and deficits is a strategy.  
Six weeks before President Obama was sworn in, the economy collapsed and the Republicans began their familiar chant…“spending is out of control and the country is going bankrupt.” 
Newly installed Governors cut the federal workforce; remember, Reagan ( the man Republicans credit with economic problem-solving) increased the federal workforce to one of the largest in history.  They cut employee pay and pensions, while they delivered more tax cuts to the wealthy.  They busted unions, destroying employees last firewall between workers and employers.  All of these acts redistribute the treasury from the middle class and working poor to the wealthy.

It isn’t ideology that drives the Republican insistence on spending cuts, it’s a strategy.  Think about it…the Republicans controlled the House, the Senate and the White House for four consecutive years.  They could have fixed Medicare and Social Security, but for some reason, there’s never a problem unless a Democrat is in the White House.Listen to how fervently they defend cuts to defense.  Why?  Afterall, defense workers are unionized public employees.  Because there isn’t a department that shifts more taxpayer money to the private sector than the Defense Department.  There is no other federal vehicle that allows the wealthy to extract more money from the treasury, convert more taxpayer revenue to the private sector than the Defense Department.

Throughout history, since 1783, tax cuts for the wealthy and increased defense spending and union busting have increased the gap between the revenues and the expenditures. Shareholders and those on Wall Street have enjoyed inflated returns, while the wages for workers have taken a beating.   It’s a 21st century Gilded Age.

In the final analysis, the real targets are Social Security, Medicare, Medicaid; any program that supports the less fortunate.   Republicans have a long-standing, deeply-held  antipathy for both Social Security and Medicare. Not only did Reagan advocate that Social Security should be privatized, he was at the forefront of a coalition against Medicare with the same arguments we hear today.

How did the public ever buy the idea that Republicans are good stewards of the economy?   Studies have been done comparing every phase of economic growth, during Democratic and Republican presidencies and congresses, and they all show stunningly better performance when Democrats are in power.

The trickle down miracle never worked because lower taxes don’t generate more revenue, they generate deficits.  It is a fact that is so mathematically  basic, it borders on common sense.

Centrism in Extremis: How “Serious People” Handed the Hostage-Takers Their Weapons

Thursday, August 4th, 2011

(by Bruce Schmiechen, cross-posted from “The Titanic Sails at Dawn”)

Jon Chait at New Republic offers some important analysis of how the “serious center” enabled the hostage-takers and outright loonytoons types of the Tea Party – who are driving Republican strategy and threatening to take the country off of an economic cliff in an act of political insanity never before even seriously contemplated in American politics.

His conclusion is clear and simple: “…the deficit hawks who represent the center of Washington establishment thought badly underestimated the danger entailed by tying high stakes negotiations involving the Republican Party to a cataclysmic event.”

Deficit reduction, focused on conjured issues like the future budgets of Medicare or Social Security (which have absolutely nothing to do with our deficits or the debt ceiling), has become the Holy Grail among many Beltway types – when in fact the economic crisis we actually face is about jobs and resultant shortfalls in federal revenues, made worse by a decade of profligate tax cuts.

The hysteria around deficits is not just wrong-headed but dangerous in our current straits – former Council of Economic Advisors chair Laura D’Andrea Tyson warned this week that “the risk grows that large, premature cuts in government spending will reduce aggregate demand, will tip the economy back into recession and drive the unemployment rate back into double digits.” The way out of crisis is not through slashing the federal budget but by getting people back to work and, ultimately, re-balancing our tax code.

The “deficit hawks” dominating “serious” Washington-centric opinion have consistently acted as enablers of a “Tea Partyized” GOP – the runaway vehicle driven by an extremist faction whose agenda ranges from incoherence steeped in cultural resentments to the outright sinister and duplicitous Randian schemes of Norquist & Co.

“The failure to understand the crisis we were entering was widely shared among centrist types. When Republicans first proposed tying a debt ceiling hike to a measure to reduce the deficit, President Obama instead proposed a traditional, clean debt ceiling hike. He found this position politically untenable for many reasons, one of them being that deficit scolds insisted that using the debt ceiling to force a fiscal adjustment was a terrific idea, and that connecting the deficit debate to a potentially cataclysmic financial event was the mark of seriousness. The Committee for a Responsible Federal Budget argued:
[F]ailing to use this debt ceiling ‘hammer’ to force serious fiscal reforms would be a dangerous lost opportunity. This country needs a deal to achieve $4 to $5 trillion in deficit reduction, and we need to put such a deal in place as quickly as possible.”

The Concord Coalition chimed in:
“[T]he need to raise the debt limit does provide an opportunity to assess past fiscal decisions and, if necessary, make corrections. In the past, major increases in the debt limit have often been accompanied by the enactment of deficit reduction plans such as the November 1990 increase of $915 billion, the August 1993 increase of $530 billion, and the August 1997 increase of $450 billion. In the absence of such linkage, Congress has been reluctant to raise the debt limit by more than is necessary to get through a short period of time. Thus, while the debt limit is not, by itself, a fiscal firewall, in the absence of other more effective mechanisms, it is one of the few budgetary speed bumps left to provide a sense of fiscal discipline.”

And the Washington Post editorial page repeatedly endorsed using the debt ceiling to force a deficit reduction. The operating assumption was that both parties required encouragement to act on reducing the deficit:
“[W]e retain some shred of hope that the bipartisan group of senators known as the Gang of Six will come forward with a productive contribution. The group is working off a blueprint produced by the fiscal commission that the president convened and then abandoned. Perhaps the fact that the other main alternative on the table is the considerably less centrist plan put forward by House Budget Committee Chairman Paul Ryan (R-Wis.) will lure the White House into the fray.
The political assumptions here turned out to be badly wrong. The main problem is that the Republican Party does not actually care very much about the deficit. It cares about, in order: Low taxes for high-income earners; reducing social spending, especially for the poor; protecting the defense budget; and low deficits. The Obama administration and many Democrats actually do care about the deficit and are willing to sacrifice their priorities in order to achieve it, a desire that was on full display during the health care reform debate. Republicans care about deficit reduction only to the extent that it can be undertaken without impeding upon other, higher priorities. Primarily “deficit reduction” is a framing device for their opposition to social spending, as opposed to a genuine belief that revenue and outlays ought to bear some relationship to each other. ”

The Post has since published a series of increasingly terrified-sounding editorials pleading for a debt ceiling hike backing away from its bold hopes that the debt ceiling would produce a bipartisan compromise. In retrospect, they now see what should have been obvious: Increasing the political leverage of the Republican Party made a Grand Bargain less, not more, likely. Moreover, Happy visions of Bob Dole and Tip O’Neill danced in their heads, oblivious to the reality of what they were facing…

If the United States goes into default, the so-called “deficit hawks” purveying conventional Washington wisdom will bear at least a share of the responsibility for helping to advance the wrong-headed ideology that led to a self-inflicted catastrophe. This is, indeed, an example of extremism being aided and abetted by the self-proclaimed “serious center.” If “the center does not hold” in the face of the debt ceiling brinksmanship, it’s because the center has been ceded to the economic fundamentalist ideology of the irresponsible and ill-informed Right.

Angry About the Debt Ceiling Deal? Blame the GOP, Not Obama

Monday, August 1st, 2011

Winning Progressive is on vacation this week, so I am going to keep this post about the debt ceiling deal short.  The deal that has apparently been reached, the details of which can be read here, is bad, as it focuses far too heavily on cuts to government spending at a time when we should be talking about increased stimulus to deal with unemployment and sluggish economic growth.

But, there are two quick points that I hope all of us progressives will keep in mind. 

First, President Obama and the Democrats did manage to get some concessions through this deal that should help minimize the damage.  Most importantly, they prevented the economic disaster that would have been caused if we had defaulted, which is what the teabaggers wanted.  In addition, Social Security and Medicaid are exempted from the automatic cuts that would be triggered if Congress does not find other reductions.  Also, Medicare reductions are only to providers, not beneficiaries, and a good portion of cuts would be from military spending.   Finally, a large amount of the cuts are delayed until 2013, so the blow to the economy would be at least delayed.  Those are all important features that the Democrats managed to get to improve an overall bad deal.

Second, in order to repair the damage and shift the debate, we must direct our anger over the debt ceiling deal at the GOP hostage takers, not the Democrats who had to negotiate to save our economy.  And we must redouble our efforts to get a Democratic Congress back in 2012 so that we can turn back the cuts in the deal.  If we progressives get discouraged or engage in a circular firing squad against President Obama and the Democrats, we will only be giving the GOP even more power.  Let’s not play into the conservatives’ hands.  Instead, let’s fight to take our government back from the GOP.

Weekend Reading List

Sunday, July 31st, 2011

For this weekend’s reading list, we have an analysis of the debt ceiling and the Supreme Court, an essay about how Democrats can appeal to voters, an article on a photographer who documents the environmental impacts of industrial activity, an overview of how expensive it is to be poor, a debunking of conservative myths on Social Security, and an explanation of why there is no short term deficit crisis in the U.S.  

If you have any feedback on these articles, or would like to recommend an article for next weekend’s reading list, please let us know at Winning Progressive’s Facebook page

How Would the Supreme Court Rule on Obama Raising the Debt Ceiling Himself? – an evaluation of the constitutional arguments surrounding President Obama using the 14th Amendment to ignore the debt ceiling, and arguing that the Supreme Court would almost certainly reject any lawsuit challenging such action

Why Voters Tune Out Democrats - an essay explaining how polls show that voters support the Democratic position on issues, but are reluctant to vote for Democrats because the voters do not trust that the Democrats will actually fight to get those policies enacted  

Industrial Scars: The Art of Environmental Pollution – an essay and photos from J Henry Fair, a photographer who does some quite impressive work capturing the impact that the oil, coal, and other industries have on our environment 

Why Being Poor is More Expensive Than Being Rich – an overview in ways that our society places far more costs on poor people than it does on the wealthy

Social Security Q&A: Separating Fact From Fiction - an overview of the main issues surrounding Social Security and its long term solvency, including a debunking of various conservative myths about Social Security

The U.S. Is Not Drowning in Debt – an argument that there is no deficit crisis in the U.S., given that net interest on the debt is at nearly its lowest level since the 1970s

The Balanced Approach Versus Hedge Fund Managers Getting Off Scot-Free

Monday, July 25th, 2011

The contrast between the competing approaches of President Obama and the House Republicans to the debt ceiling and deficit reduction was perfectly crystallized when both our President and House Speaker John Boehner (R-OH) gave speeches on these issues on Monday night.  On the Democratic side is the  balanced approach that calls for everyone – including hedge fund managers, corporate jet owners, and other wealthy Americans who have made out like bandits over the past thirty years – to help reduce the deficit.  On the GOP side, Speaker Boehner continues to promote his “Cut, Cap, and Balance” plan that lets the wealthy get off scot-free by requiring $0 in revenue increases while imposing $5.5 trillion in cuts on programs that benefit the middle class, working class, and poor.

Below are some highlights from President Obama’s speech.  After you read them, please heed President Obama’s call and contact Congress in favor of the balanced approach:

The American people may have voted for divided government, but they didn’t vote for a dysfunctional government. So I’m asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your Member of Congress know. If you believe we can solve this problem through compromise, send that message.

If you agree, call your Representative and Senators and let them know how you feel.  We’ve heard that the Congressional switchboard is overloaded with calls, so your best bet is to try the district office numbers, which can be found here.

Here are a few highlights from President Obama’s speech.

First, the President reminded us that how our budget surplus was wasted during the W. Bush Administration, a point that is also well illustrated by this chart:

In the year 2000, the government had a budget surplus. But instead of using it to pay off our debt, the money was spent on trillions of dollars in new tax cuts, while two wars and an expensive prescription drug program were simply added to our nation’s credit card. As a result, the deficit was on track to top $1 trillion the year I took office.

Next, President Obama explains the balanced approach to deficit reduction:

The first approach says, let’s live within our means by making serious, historic cuts in government spending. Let’s cut domestic spending to the lowest level it’s been since Dwight Eisenhower was President. Let’s cut defense spending at the Pentagon by hundreds of billions of dollars. Let’s cut out the waste and fraud in health care programs like Medicare – and at the same time, let’s make modest adjustments so that Medicare is still there for future generations. Finally, let’s ask the wealthiest Americans and biggest corporations to give up some of their tax breaks and special deductions.

This balanced approach asks everyone to give a little without requiring anyone to sacrifice too much. It would reduce the deficit by around $4 trillion and put us on a path to pay down our debt. And the cuts wouldn’t happen so abruptly that they’d be a drag on our economy, or prevent us from helping small business and middle-class families get back on their feet right now.

This approach goes farther on spending cuts than we here at Winning Progressive would like, especially given that the key to reducing the short term deficit is getting the economy moving again, not cutting spending.   But with the GOP holding our entire economy hostage, it is clear that some cuts to government spending and deficit reduction will have to occur in order to avoid default, and this balanced approach is by far more reasonable than anything the GOP is proposing.   Note also that, contrary to the unsubstantiated rumors floating around various blogs, the President has reiterated that he wants to make Medicare more sustainable by rationalizing health care spending, not by cutting benefits.

The President then contrasted his balanced approach with the ask-nothing-of-the-wealthy approach taken by the Republicans:

The only reason this balanced approach isn’t on its way to becoming law right now is because a significant number of Republicans in Congress are insisting on a cuts-only approach – an approach that doesn’t ask the wealthiest Americans or biggest corporations to contribute anything at all. And because nothing is asked of those at the top of the income scales, such an approach would close the deficit only with more severe cuts to programs we all care about – cuts that place a greater burden on working families.

So the debate right now isn’t about whether we need to make tough choices. Democrats and Republicans agree on the amount of deficit reduction we need. The debate is about how it should be done. Most Americans, regardless of political party, don’t understand how we can ask a senior citizen to pay more for her Medicare before we ask corporate jet owners and oil companies to give up tax breaks that other companies don’t get. How can we ask a student to pay more for college before we ask hedge fund managers to stop paying taxes at a lower rate than their secretaries? How can we slash funding for education and clean energy before we ask people like me to give up tax breaks we don’t need and didn’t ask for?

That’s not right. It’s not fair. We all want a government that lives within its means, but there are still things we need to pay for as a country – things like new roads and bridges; weather satellites and food inspection; services to veterans and medical research.

Next, the President explains how the debt ceiling only became a problem when the crazies who run today’s Republican Party decided that taking our economy hostage is a reasonable way to try to achieve their ideological agenda:

In the past, raising the debt ceiling was routine. Since the 1950s, Congress has always passed it, and every President has signed it. President Reagan did it 18 times. George W. Bush did it 7 times. And we have to do it by next Tuesday, August 2nd, or else we won’t be able to pay all of our bills.

Finally, President Obama reminded us all what will happen if the Republican hostage takers succeed in preventing an increase in the debt limit:

If that happens, and we default, we would not have enough money to pay all of our bills – bills that include monthly Social Security checks, veterans’ benefits, and the government contracts we’ve signed with thousands of businesses.

For the first time in history, our country’s Triple A credit rating would be downgraded, leaving investors around the world to wonder whether the United States is still a good bet. Interest rates would skyrocket on credit cards, mortgages, and car loans, which amounts to a huge tax hike on the American people. We would risk sparking a deep economic crisis – one caused almost entirely by Washington.

Increasing the debt ceiling is absolutely imperative, but we also must not give in to the pathological intransigence of the GOP on this issue.  Therefore, contact your Congresspeople and let them know that you want a balance approach to raising the debt ceiling, rather than crashing our economy simply so hedge fund managers and corporate jet owners can get off scot-free.

Weekend Reading List

Sunday, July 24th, 2011

For this weekend’s reading list we have an article about Mayor Bloomberg joining the fight against coal, a primer on the debt ceiling and the deficit, a look back at the career of journalist Daniel Schorr who died one year ago, an overview of the Consumer Financial Protection Bureau’s powers and limits, and a review of a book about the deadly Chicago heat wave of 1995.

If you have any feedback on these articles, or would like to recommend an article for next weekend’s reading list, please let us know at Winning Progressive’s Facebook page


Michael Bloomberg Funds Guerrilla War Against Big Coal – coverage of New York City Mayor Michael Bloomberg’s decision to give the Sierra Club $50 million to challenge coal-fired power plants

Separating the Debt Limit From the Deficit Problem – a helpful primer from the Center on Budget and Policy Priorities on the differences between the short term debt ceiling issue and the long term deficit challenges

Journalism Legend Daniel Schorr Dies at Age 93 - on the first anniversary of the death of journalist Daniel Schorr, who worked with Edward R. Murrow and was on President Nixon’s “enemies” list, it is important to look back on the life of one of the last true journalists in America

Will Innovative New Financial Regulator Be Hobbled Before It Even Starts? – an article and collection of links explaining the powers and goals of the Consumer Financial Protection Bureau and how the GOP’s refusal to approve a Director is limiting the CFPB’s ability to fully protect consumers

Political Heat – A New Yorker review of a book about the public health, social, and political impacts of the 1995 heat wave in Chicago that killed more than 500 people