Thursday, July 26, 2007
In the superficial beauty pageant that passes for the Democratic Party’s presidential nominating process, preening candidates are recoiling from taking substantive stances on the pressing issues of the day, especially economics. They prefer to evolve policy positions tailored to fit the uninformed opinions of media-soaked meme-consumers who believe that the economy is not in a shambles because they can still charge food to their 30 percent interest credit cards. The cliché-driven websites of the Hillary Clinton and Barack Obama campaigns do not even get close to using the d-word, as in out-of-control deficit, a situation which presages national bankruptcy.
The last thing that the air-brushed candidates want to talk about is the skyrocketing national debt or the looming bankruptcy of credit card holders. Socked by falling housing prices and the transformation of the American economy into a service and consumption model in which labor productivity is slowing down like a used battery as cheap imports from China proliferate, our balance of trade is in a $856 billion hole and the personal savings rate fell to $132 billion for April.
President Bush’s budget deficit, which has been growing like a war-watered weed despite years of warnings to stop deficit spending issued by financial experts working for the government, exposes the failure of the neoconservative agenda. By comparison, Bill Clinton not only balanced the budget, he used hundreds of billions in surplus monies to start paying down the national debt; Bush’s 2008 projected deficit may go as high as $516 billion. Since 2000, the national debt has shot up by a trillion dollars to $8.4 trillion.
Bush and Congress gave control of the economy to energy corporations and war contractors while ignoring the well-being of America.
The Comptroller General of the United States, David Walker, has been pointing out for years that the best way to create savings (and increase productivity) is to reduce the annual budget deficit. Savings grow the gross domestic product as people and institutions earn interest by investing in the domestic economy instead of becoming ensnared in nets of revolving debt issued by those legally sanctioned usurers known as credit card companies. It is axiomatic that personal and governmental savings stabilize the economy; debt destroys it.
Once upon a time, flush with budget surplus, the Government Accountability Office’s director, Paul Posner, testified before Congress that “government budget deficits represent dissaving – they subtract from national saving by absorbing funds that otherwise should be used for investment. Conversely, government surpluses add to saving.”
Posner reported that in 1998 and 1999, due to unexpected tax revenues from the booming dotcom economy and a slower growth in healthcare costs than had been expected, the federal government experienced its first back-to-back budget surplus in more than 40 years. “[T]he budget is already virtually in balance and… we could experience a period of budget surpluses… continuing throughout the next 10 years,” he predicted. The combined surplus for those two years was $162 billion (almost enough to fund a year’s worth of Medicaid). Fiscally overjoyed, Posner projected that the national debt would sink to a mere $900 billion by 2009. Thanks to Bush & Co., that was not to be.
In January 2007, Comptroller Walker told Congress the bad news: “The federal government’s financial condition and fiscal outlook are worse than many may understand.” The operating deficit for 2006 increased to $455 billion, and the government’s net worth decreased to $9 trillion. Worse, the long-term structural deficit rose from $20 trillion to $50 trillion during the first six years of Bush’s administration. “Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living and ultimately our domestic tranquility and national security,” Walker warned.
The situation is so dire, he continued, that “closing the fiscal gap would require spending cuts or tax increases equal to 8 percent of the entire economy each year over the next 75 years, or a total of about $61 trillion in present value terms. To put this in perspective, closing the gap would require an immediate and permanent increase in federal tax revenues of more than 40 percent or an equivalent reduction in federal program spending.” (The Department of Defense uses about 50 percent of the discretionary budget, plus about a $100 billion per year in “emergency supplementals,” i.e., automatic deficit spending, for the wars on Iraq and Afghanistan. Ending the counterproductive “global war on terror” could seriously deflate the budget deficit.)
“The cold, hard truth,” Walker said, “[is] that neither slowing the growth of discretionary spending nor allowing the tax [cut] provisions to expire – nor both together – would eliminate the [long-term] imbalance. … Although Social Security is a major part of the fiscal challenge, contrary to popular perception, it is far from our biggest challenge.… [R]ising healthcare costs pose a fiscal challenge not just to the federal budget but also to states, American business and our society as a whole. Washington suffers from myopia and tunnel vision.”
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So how did we get from a surplus in 2000 to the bleak present and the bankrupt future that Walker envisages? Fiscal terrorism: Bush and Congress gave control of the economy to energy corporations and war contractors while clearly and deliberately ignoring the well-being of America. And despite increasingly shrill warnings to reduce the deficit by the government’s accountants, Bush’s proposed 2008 budget goes in exactly the wrong direction.
The federal budget for fiscal year 2008 is nearly $3 trillion, including a half-trillion-dollar deficit. Going directly against the advice of government economists, Bush proposes to extend and make permanent the huge tax cuts (mostly benefiting the rich) adopted in 2001 and 2003. This will reduce tax receipts by $1.9 trillion through 2017. Extending all of the tax cuts set to expire during the next 10 years will cause a revenue loss of $3.1 trillion during the same period. However, the alternative minimum tax, which socks it to the middle class, is scheduled to remain in place for the long run, despite being temporarily (and cynically) fixed for the presidential election year.
Bush proposes to “slow” the long-term growth of Medicare and Medicaid not by addressing exorbitant healthcare costs, but by creating new tax credits for healthcare. He furthermore proposes establishing personal accounts – initially funded by the government with tens of billions of dollars deposited on Wall Street – for Social Security in 2012.
Check it out: Despite the repudiation of Social Security privatization by the American people, Bush is going ahead, under the radar, with his crazy plan to turn Social Security over to such superprofit-seeking entities as Goldman Sachs. (Look at your 401-K, if you have one. Will the volatile stock market sustain your retirement needs? Not likely.)
On the deficit-spending side, Bush is substantially boosting funding for his global war against the poor and his waste-plagued homeland security programs. Interest spending on increased debt will go up by $7 billion. Bush also proposes to cut nondefense spending, but, says the Congressional Research Service, “How the administration plans to achieve these reductions… is not illuminated in the budget.” The Service concludes that “the current mix of federal fiscal policies is unsustainable.”
But have you heard a Democratic Party presidential candidate say so? Why not? Because getting out of the hole will require ending political pork and tax cuts for the rich, who are the only people who seem to matter in our crazy plutocracy.
PETER BYRNE is a columnist for the North Bay Bohemian, where this article first appeared.