Monday, May 28, 2012

Bush/Obama/Generic Spending Binges

Once again Ezra Klein has cut through the poke-and-response political positioning between the parties, and written the obvious truth about the “Obama spending binge”, which does and does not exist.  And he has correctly pointed out that deciding whether it exists or not is a premeditated act of pugilistic political fantasy, not an effort to find any truth.   Everyone who is talking about this on either side should now make their way to the exit of the conversation, shuffling their feet and mumbling to themselves in embarrassment.  They won’t, but they should.  

Here’s the issue: Obama inherited the 2009 budget, which was passed in 2008, under Bush but by a Congress controlled by the Democrats.  And since the 2009 fiscal year, federal spending has actually declined slightly in real terms: under Obama, but in the last two years lashed to lower spending by a Tea-Party House and a Senate largely controlled by filibuster.  So who gets the credit, or blame, for 2009, which was largely executed by Obama but passed under Bush?   Here’s Klein’s response to that:

“I’d point out that this entire conversation is nonsense. So far, we haven’t mentioned the only fact that really matters, which is that the economy began to collapse in late-2008, and continued to crater through much of 2009. Or, as Donald Marron, director of the Tax Policy Center, puts it, ‘the real issue is that 2009 is an anomaly driven by crisis.’”

Yes.  And we have been driven by crisis ever since, too; the recession officially ended June of 2009, but the recovery is nothing like complete.  We are still grinding through hard times.  

There is a real debate to have on this topic: not how high the deficit has been, or how much spending has taken place, but how much should have taken place, and how much should take place in the future.  I’ve been arguing for a long time that spending was high in 2009 but should have been much higher, then and since.  And it should still be higher.  We should be borrowing money at near-zero interest rates, or taxing the wealthy, to spend money restoring and extending our infrastructure; this would not only alleviate unemployment (and reduce our unemployment-insurance payments), but would be a great investment for the country’s future.  We should be doing this on a massive scale.  That’s my view, and there are many respected economists who agree.  There are also many respected economists who strongly disagree.  It’s a debate worth having.

There’s a debate to have on who created the recession, too; I don’t really think that either Bush or Obama should be blamed for it.  Obama certainly should not be blamed for the initial collapse, since it began more than a year before he took office, and shouldn’t (in my opinion) be blamed for the length of the recession either, since he’s been fighting tooth and nail with an obstructionist Republican-dominated Congress to find a path out.  But Bush shouldn’t really be blamed either, or at least not alone.  What did he do that created it?  The tax cuts did not create the boom that Bush promised, but they also did not create this recession.  In my opinion it was created at least in part by decades of undersaving by the public, which was depending on rising housing prices to create the wealth on which they would retire.   When those housing prices collapsed the self-perceived wealth and security of those who had depended on them collapsed too.   And it was created in part by decades of increasingly lax regulation of banks, including the repeal of Glass-Steagall by a Republican Congress but under, and signed by, Democratic President Bill Clinton.  There are respected economists who agree on both of those, particularly the latter, and there are other respected economists who disagree. It’s a debate worth having.

But we can’t have that debate publicly, because this poking, dancing, posturing, sound-bite nonsense is crowding out any possible clarity about this.  Neither side is willing to discuss the real issues.

Here’s Klein’s conclusion:

“Properly understood, the fact that inflation-adjusted spending has fallen since fiscal year 2009 is the result of Republican obstruction in Congress. That Democrats are now crowing about these numbers -- the DNC is e-mailing them around -- and that Republicans are now viciously disputing them is an embarrassment to both sides. You could as easily imagine Democrats lamenting these numbers as evidence of our failed policies and Republicans celebrating them as evidence of their congressional successes.

But Republicans don’t want to admit that they bear substantial responsibility for the economic policy of the last few years. If they did, then it would be hard to argue that the economy’s performance in 2010 and 2011 is all Obama’s fault. And the Obama administration doesn’t want to clearly say that we should have been spending more in recent years, even if that’s what they believe, and what they proposed, because it polls poorly. And so here we are.”

Yep. Here we are, and here we will be for the duration of the campaign, and probably after that forever.

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