- Sep 2, 2008
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http://www.nytimes.com/2010/08/01/opinion/01stockman.html?_r=1
This is a interesting article to say the least. Thoughts USMB? Toro?
IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nations public debt if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 will soon reach $18 trillion. Thats a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nations wealthiest taxpayers be spared even a three-percentage-point rate increase.
Republicans used to believe that prosperity depended upon the regular balancing of accounts in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses, too. But the new catechism, as practiced by Republican policymakers for decades now, has amounted to little more than money printing and deficit finance vulgar Keynesianism robed in the ideological vestments of the prosperous classes.
It is also an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves. Just let the free market set currency exchange rates, he said, and trade deficits will self-correct.
It may be true that governments, because they intervene in foreign exchange markets, have never completely allowed their currencies to float freely. But that does not absolve Friedmans $8 trillion error. Once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors.
In 1981, traditional Republicans supported tax cuts, matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administrations hastily prepared fiscal blueprint, however, was no match for the primordial forces the welfare state and the warfare state that drive the federal spending machine.
Soon, the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending exempted from the knife most of the domestic budget entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans fiscal religion.
Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.
It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans paid mainly from the Wall Street casino received two-thirds of the gain in national income, while the bottom 90 percent mainly dependent on Main Streets shrinking economy got only 12 percent. This growing wealth gap is not the markets fault. Its the decaying fruit of bad economic policy.
Under these circumstances, its a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach balanced budgets, sound money and financial discipline is needed more than ever.
This is a interesting article to say the least. Thoughts USMB? Toro?