Having just spent two-weeks vacationing in Europe I was mercifully spared our political Kabuki theater on the budget impasse.
I returned, sadly, to a Washington that was still a shrieking, destructive, primal, feudal, apocalyptic wasteland of partisan banshees …
(This is how Maureen Dowd artfully described it in the NYT today).
I tuned in Monday night to Obama’s address to the nation from the White House. The speech was numbingly uninspiring. What happened to the great communicator? Obama droned on and on
Good Evening. Tonight, I want to talk about the debate we’ve been having in Washington ……
Neither party is blameless for the decisions that led to this problem, both parties have a responsibility to solve it…
Yada, yada, yada..
I must have dozed off. Obama’s face became fuzzy and soon he morphed into someone else, a past president …
Could it be? ..
Yes it was …
Bill Clinton stood at the presidential podium!!
We were in an alternate universe. The 22nd Amendment – gone! Bill Clinton, President for a third term. Was this a manifestation of what was lingering in my tortured subconscious?
“My fellow Americans” began Clinton with that familiar purse of the lip. He was in charge, straight-talking, relentless:
Today I stand before you with our country in great economic peril. When I left office in 2000 we had experienced the most prosperous America ever. We had a budget surplus, had created 22 million jobs and were admired all over the world for our innovation, high productivity and leadership. Our prosperity was broadly shared, wealth and income inequality was at its lowest and we had a low inflation economy with close to full employment. Our tax rates were the lowest they had ever been and yet we were on the path to substantially wiping out our debt in a few years.
In 2001 President Bush took office and reversed course. He cut taxes at the top, started two wars and further deregulated the financial sector to dangerous levels of leverage. A huge unneeded boost to the economy was produced artificially through surplus deficit spending. Our deficits soared and our economy overheated. We started producing less and living on credit. A huge bubble was created while we racked up deficits of unprecedented trillions at precisely the time when we should have been reducing debt and saving for the cyclic downturn that was to inevitably follow. Astonishingly the average working class American did not share in this fake growth – the money all went to the speculators, the hedge funds, the investment bankers and their fancy new financial derivative inventions to soak up the artificially created money and kite it even further without fear of regulation or antitrust. A dangerous, unchecked Ponzi scheme was (perhaps unwittingly) spawned spurred on by radical “free market” ideology and a power grab by moneyed behemoths.
Our government became a wholly owned subsidiary of big business which of course pumped substantial special interest money into its wholly owned puppets – our legislators.
It could not last. In 2008 the bubble finally burst. It was a catastrophe! Our economy had a gigantic collapse, a massive coronary from eight years of deficit-fed cocaine into its bloodstream. We were looking at a once-in-a-century recession. When I came back into office in 2009 we had to shelve all our priorities to fix this existential threat to our nation.
We were looking at an economy which spasmed into a huge contraction. The stock market fell 60%. 12 million jobs were lost. Housing values collapsed. Pension funds were decimated. Credit became nonexistent for small businesses, for college, for venture investment and for home ownership or refinance. Our tax revenues tanked at the same time as our needs to bolster the economy and our obligations to those displaced were the greatest. This was not caused at my watch. I inherited this and needed to do extraordinary things to get our economy out of Intensive Care.
No one knew precisely how to fix this because it had never happened at this scale before. Had we not taken any action we were looking at the demise of our banks, of our automotive industry, and of every small business that depended on credit. We were looking at the destruction of everyone’s savings, pension plans and money market funds that would fall to fractions on the dollar. And we could spiral down from there – a depression with 30+ percent unemployment and massive social disruption was looking like a real possibility.
My fellow Americans at this juncture the only entity that could save us from depression is the Federal government. It’s amusing to hear the Tea Party sloganeering, “Government is not the solution, it is the problem”. Unfortunately it is an empty slogan, though pithy to some. With the collapse of the consumer, a collapse of demand in the economy the government alone can give the required external boost or we risk a spiraling depression. That is a fact on which all impartial economists agree.
So I have been forced into a recession dictated federal spending budget even while our receipts were collapsing. This has resulted in a big deficit and, as the Republicans never tire of telling you, we are borrowing 40 cents for every dollar we take in as revenues. They characterize this as Big Government Spending, implying some kind of a socialist takeover of the free market system. The truth is that the deficit is a result of a major recession, the worst we’ve ever seen thanks to the policies of the same ideologues who never questioned the deficits when they were incurred by choice and not forced by necessity. I agree with my opponents on the other side of the political aisle that our debt is too large and out of control. But what they don’t tell you is that it was caused by Bush era overspending, war and irresponsible cuts in the already low and sensible top tax rates.
And their solution? Bewilderingly it is a continuation of the same failed policy that got us here. Cut top taxes even further, deregulate banking, and curtail the social net. That will somehow boost employment? In what alternative world is that?
Some words here on our social net, i.e., medicare, medicaid, social security and other benefits. The truth is that the highest component of federal revenues today is payroll taxes. These were not envisioned as taxes at all but as insurance premiums for guaranteed social security, medical health for the elderly and such things as disability and unemployment. Today the payroll taxes produce a net surplus against social security and other social net payments – thus these payroll taxes are actually helping to reduce our debt not bolster it.
Now it is true that actuarily the social net is underfunded for the future because we are living longer and because of the large number of baby boomers who are retiring. But this is a separate debate from the problem of this recession and our current debt fix. I welcome this debate and look forward to separately finding a long term solution to this actuarial problem. It will surely involve raising the age when benefits start and other tweaks we can all agree on. But to imply that we have an overspending problem today because of social security and medicare is ludicrous.
Look, our economy will eventually recover. It is already showing signs of life – corporate profits are up six quarters in a row, the stock market is almost back to pre-recession levels and tax receipts are inching up. The policies of Quantitative Easing and selective federal economic stimulus have averted disaster. We are still not out of the woods and all responsible economists advise us to go slow in removing the stimulus because a double dip recession would be even more painful. Unemployment has to be our biggest concern in the short run and it can only be addressed by proactive steps by the federal government. Then the private sector will take over and government spending decline as it did in my first two terms.
In the long run we must revert to the policies that have worked during the late 1990’s. We must agree to bring government spending levels down and a sensible, sustainable tax rate, such as the one we had when I was in office.
So let’s put this silly artificial crisis of the debt limit behind us. Enough games. They are dangerous and unnecessary.
I have put forth a budget for the next ten years that will bring us close to a balanced budget when the economy recovers. It requires us to cut much spending, disentangle from the wars we are fighting and revert to the top tax levels that are sensible and healthy. It is a compromise budget, many in my party oppose it. But they will come around. I want to make sure that the other side will similarly come around. It is becoming increasingly clear that a new crop of zealots have taken over in our legislature. They have a radical and intransigent agenda. They want us to fail, and can only think of getting in power by engendering an economic deisaster.
They have had a free pass with their agenda so far. They are not afraid to play chicken with the American economy as long as you, the voter, is apathetic or does not hold them responsible. But you stand to suffer the most under their schemes. Understand this and let them know you hold them responsible. Only then will they relent.
Then we’ll all win. Including the rich and our grandchildren.
At this point I woke up. Obama was still droning on…
We all want a government that lives within its means, but …
Yada, Yada, Yada….
Oh to have a charismatic and passionate president again!