Calling It as It Is
Once again, we stand poised on the precipice of economic calamity because the Republican-led House is intent on creating crises to push their agenda. Unfortunately, too many pundits add to Americans' cynicism by trying to find a way to blame both sides. This week, the Washington Post tried by saying that Democrats hope Republicans will fight to shut down the federal government in hopes of gaining advantage when people figure out the Republicans are to blame. Playing to cynics also plays well in portraying this as a school yard fight, which in the age of reality television and voyeurism, is a sales pitch. It however does no one well if the experts and thought leaders do not play honest umpires to call the balls and strikes as they see them.
So, here are the facts. This summer, at a fundraiser in Idaho, the speaker of the House, John Boehner, said he wanted to create a crisis out of the federal budget and funding the government. The president clearly stated he would not negotiate on keeping the government in operation, either through a fight on a continuing resolution or raising the debt limit. A continuing resolution is congressional legislation brought about when Congress has not passed budgets for the many government agencies, and so instead passes a resolution to allow the government to continue to operate by authorizing expenditures in one giant bill. To be even clearer, this is Congress authorizing money so the federal agencies can carry out the mandates of the many laws Congress has already passed—laws to inspect meat for safety, laws to prevent illegal drugs entering the country, laws to imprison people who violate those drug laws, laws to create national park lands, laws to ensure people receive their Social Security benefits and on and on. Since the House under Speaker Boehner’s leadership failed to pass those budget laws, the House is now in a position to create a crisis as Oct. 1 approaches; the first day of the new year of the federal budget.
The debt is the cumulative effect of past congressional decisions. From 1998 to 2001, the federal government ran surpluses, so the outstanding level of debt fell from $3.77 trillion to $3.32 trillion. This led the Congressional Budget Office (CBO) to project in January 2001 that federal debt would go to zero by 2012. From 2001 to 2008, the federal government ran deficits in part as a stimulus effort directed at the 2001 downturn and in part from funding wars in Iraq and Afghanistan and in part because the 2001 recovery was weak, so revenues were less than expected and expenditures (on things like unemployment insurance and food stamps were higher). This ran the federal debt up to $5.8 trillion in 2008. Many of the tax cuts put in place during that period, and new programs like the prescription drug benefit for Medicare, were left in place by President Barack Obama. By 2011, the debt had jumped to $10.1 trillion. In all, CBO figures that $3.3 trillion less was collected in revenues because of the weak 2001 recovery and the Great Recession of 2008; and spending increased for those same reasons by $112 billion. The programs that Obama inherited account for 44% of the increase in mandatory spending that CBO had not anticipated in 2001, and 49% of the increase in discretionary spending that CBO had not foreseen in 2001 was already added to the federal debt when he took office. Further, 62% of the $2.8 trillion drop in revenue from tax cuts put in place between 2001 and 2008 that CBO could not have accounted for in January 2001 were from policies that preceded President Obama. This means that it would be disingenuous at best, for Republicans to now argue about raising the debt ceiling to insure that the United States pays on the debt incurred for policies made since 2001—debts for policies that included those of President George W. Bush, Senate Leaders Trent Lott and Bill Frist, and Speaker of the House Dennis Hastert.
These crises manufactured by House Republicans are designed to bend economic policy in their direction. But, given that so far it is President Obama who has bent, the reality is that the fiscal policy pursued since 2010 and the end of the American Recovery and Reinvestment Act has been declining fiscal stimulus. In the 11 quarters since the last quarter of 2010, the federal government has been a drag on the recovery in all but two because it continues to grow smaller—paying fewer workers and buying fewer goods and services from American companies desperate to grow sales. In part this reflects the president’s gambit with the sequestration that Republicans took, shrinking GDP growth by over a point in the fourth quarter of 2012 when government procurement got rolled back in anticipation of fewer contracting dollars. Clearly, these actions take away job opportunities.
Republicans have not put forward a new vision for America. Instead, the only problem they see in the country right now is the size of the federal government. The persistent high levels of unemployment, the drop in median family income, even the increase in child poverty are not issues they are producing solutions for—except a view that smaller government will solve them. So unlike all past economic downturns, like under Presidents Ronald Reagan or George H.W. Bush, they are testing a new economic theory that a shrinking government will lower unemployment, raise family incomes and reduce child poverty. Except, following their policy of a shrinking government, the opposite is occurring. And last week, the Republican House voted in the face of rising child poverty to cut $40 billion from the Supplemental Nutrition Assistance Program (SNAP—food stamps).
In fairness to Republicans, the president proposed a recovery act that was too small and designed to end too soon. But, he has offered various plans since to increase American investment in our roads and bridges that would get many construction workers back to work while saving our children the burden of replacing bridges we could be repairing. And, he has offered plans to return teachers to the classroom, sending federal dollars to help our local schools replace the hundreds of thousands of local public education workers lost when the Great Recession sucked money out of their school district budgets. The president’s offer would reverse the first serious decrease in per-pupil expenditures American children have experienced in the post-World War II era. Republicans have rejected both ideas, since they would make “the government bigger.”
Republicans have argued that government debt is a moral issue. But, this confuses saving and investing. It does save money now when you don’t fix our roads or pay for teachers in our children’s classrooms. But that doesn’t save money in the long run. Cutting those expenditures cuts on our investment. It leaves a long and expensive “to-do” list for our children when they must confront a broken transportation system that cannot draw investors to America for fear they can’t move their goods efficiently. It also hurts our children’s education, leaves them less educated and skilled for a world that grows more technical and sophisticated every day.
Several Senate Republican leaders see this current grandstanding by House Republicans as harmful to the Republican party. Voters will not be fooled, even if the Sunday talking elite try to make this into a food fight. Shutting down the government, moving America backward and standing for nothing is not a formula to draw votes. With median family incomes still down from 2007, America's working families do not believe, as some House Republicans, that a private sector led by JPMorgan—and its acknowledgement of multiple counts of law violations, and perhaps $20 billion in fines for corrupting the financial system and causing the collapse of the world’s economy—is the solution. The stock market is booming. The “job creators,” including those like JPMorgan, that face legal charges, have soaring incomes. They are not riding in on white horses with job offers to save Middle America. Wall Street is dancing to music that only the House Republicans can hear, because on Main Street, there is still the silence of looking for work. If the pundits call it honest, this is a big strike for Republicans for playing with the economy again and failing to offer a vision of jobs and rising pay and investing in America's children. After voting to take food away from the tables of America’s children last week, this will be strike two.
