So Now They're Fiscal Conservatives

From the NY Times:

President Obama won House approval for an $819 billion economic plan without a single vote from Republicans as Democrats sought to temper their own differences.

Let's take a look at recent history, shall we? Here is a graph from the St. Louis Federal Reserve of government expenditures and receipts for the years 2001 until the most recent figures:

From 2001 until 2006 the Republicans controlled the Legislature and the presidency. Throughout this time we were told the economy was the "greatest story never told". At the same time, the government was clearly operating in deficit territory. In fact, according to the US Bureau of Public Debt, the US government issued over $500 billion of new new debt per year every year since 2003 (and came really close in fiscal year 2002):

09/30/2008 $10,024,724,896,912.49
09/30/2007 $9,007,653,372,262.48
09/30/2006 $8,506,973,899,215.23
09/30/2005 $7,932,709,661,723.50
09/30/2004 $7,379,052,696,330.32
09/30/2003 $6,783,231,062,743.62
09/30/2002 $6,228,235,965,597.16
09/30/2001 $5,807,463,412,200.06
09/30/2000 $5,674,178,209,886.86

So -- the Republicans clearly have no fundamental issue with deficit spending. Then it must be something else.

The economy was growing from 2001-2006 when the Republicans were in power. It was the "greatest story never told". That means government spending as a tool to get the economy going isn't a bad thing according to Republicans. So it must be something else.

Let's see .. what could it be ...

Oh yeah. The country is in the middle of one of the worst recessions in over 70 years. Consumer spending is falling off a cliff, industrial production is collapsing, capacity utilization is down, housing is in the tank, unemployment is rising, more and more companies are announcing big lay-offs, investment spending is falling .... you get the idea. The government is the only player who can do anything right now because every other economic player is out of the game. Yet -- according to Republican economic philosophy -- this is the time to become fiscal conservatives.

Please.

Comments

[TRex86]

I don't understand why more Huffpo readers don't read Bonddad's trenchant blogs. The lesson of 2009 is the same as the lesson of Watergate: Follow the money. As has been so aptly described, Rethugs are the Marie Antoinette class of the new millennium. This is class warfare from the top down, waged by the plutocracy. With the exception of Teddy Roosevelt the Republican Party for the last century has ONLY been the spokesman for the interests of the ultra-rich. To wit:
1. They hate the progressive income tax.
2. They hate social welfare programs.
3. They hate labor unions.
4. They hate any and all vestiges of the New Deal.
5. They hate regulation.
6. But they love corporate welfare and gratefully receive taxpayer dollars so long as they are charged to the account of low income workers and future generations.
7. They could care less about conservative moral values other than as a convenient coalition partner that is easily duped with bumper sticker platitudes into acting against self-interest.

[FreedomBeforeDemocracy]

This author just described how the republicans policy of deficit spending got us to where we are today. Then he said we should continue deficit spending. Why do progressives want to continue the policies that got us into this situation? If government spending is stimulus and we've just been spending a lot of money, shouldn't the economy be doing great. Was Bush's spending too little (biggest increase since LBJ)?

Let me recap: Moderate deficits (although historically high moderate compared to new stimulus) make economy bad, big deficits make economy good. Okay. I get it. Is this neo-keynesian?

[oncethere]

It is almost impossible for me to listen to people like Boehner and McConnell whine about spending now, when they uttered not a word about it for 8 years when Bush and the Republicans were sending boatloads of cash to Iraq.

[FreedomBeforeDemocracy]

They spent a lot more than just Iraq. However, personally, I never get tired of hearing politicians whine about spending too much money. The only problem is it is usually just whining, i.e. no action.

[LeftRight]

First, there's spending, and then there's spending. Deficit spending to provide massive tax cuts to the wealthiest Americans while at the same time fighting two wars off budget it type A spending. Type B spending is providing tax cuts and spending increases for the working classes of America. Type A will result (EVERY TIME!!!) in a series of boom and bust cycles which could potentially destroy America. Type B spending will result (usually..­.) in a stable growth economy where there is a strong middle class.

[FreedomBeforeDemocracy]

Boom-bust cycles have absolutely nothing to with tax cuts whether they are for the rich or not (although the Bush tax cuts once again shifted the tax burden upwards. Yes. Made the rich pay more (as a percentage) and dropped more people off from paying any taxes at all. That's the only way to get a tax cut in modern America.) These cycles are the product of our market economy. They have occurred since our inception with/without income tax and even with/without a central bank (although the central bank seems to make them worse.)

It's obvious you didn't like the spending on the wars (although even with them, defense as % of GDP is below its 45 year low). Did you like the increase of federal involvement in schools, the further socializing of medicine, the increased aid to Africa? All of these help Bush be the bigger "increaser" of the federal government since LBJ (with big help from his party in congress).

Those Bush tax cuts, by the way, were an economic stimulus if you want to judge by GDP and employment. This current bill is nothing but the federal government trying to take more power. 1/2 of the spending wasn't slated for 2 years, although I think they changed it, so only 1/3 will have to wait. I guess that's the democrats idea of compromise.

[TRex86]

Deficit spending is neither good nor bad. It depends on the context. In an inflationary environment it tends to worsen inflation. In a deflationary environment it can save the day. Since deflation is a rare event few appreciate its impact. Most Americans were born after the Great Depression. We have lived in a world where fiscal and monetary policy are used to modulate cycles of boom and bust (prosperity and recession), taming bursts of inflation.
Recessions result from inventory imbalances. Depressions come from collapses in economic systems of production and finance. We're there. The good news is that deficit spending in this environment cannot be inflationary. If properly done it will prime the economy and accelerate a recovery. If badly done it will have no impact on the downward spiral of deflationary collapse. By 1932 unemployment was 25% and the Dow Jones had lost 90% of its value.
Moreover, our deferred expenditures on infrastructure offer a no-brainer for priming the economy. Dollars spent there will multiply via new jobs and greater economic productivity. What do we do with these mammoth levels of federal debt in the long run? We grow the economy to shrink the amount as a percent of GDP and we start paying it down. When we have the luxury of addressing this question we will have to take a comprehensive look at the structure and financing of the entitlements, which already account for $56 trillion of future unfunded liabilities (but that's matter for another post).

[FreedomBeforeDemocracy]

It is important to distinguish between price and monetary deflation. We are currently experiencing price deflation based on two factors: a little bit of hording and return from a spike in fuel prices. As we have almost double the monetary base since October, we are not, on the other hand, experiencing monetary deflation. When we start recovery, all that money will still be in the system, and as people return to a normal level of consumption, prices will reflect the amount of dollars available.

[realpolitic]

"The government is the only player who can do anything right now because every other economic player is out of the game. Yet -- according to Republican economic philosophy -- this is the time to become fiscal conservati­ves." Yes, it is a very similar situation to the Great Depression when businesses would not spend and banks would not lend. It is, as it was then, an excellent time for government to create jobs by improving our infrastruction which is dire need of repair anyway. Apparently, conservatives did not get the memo and will stick to their failed policies of old. Conservatives apparently believe when in a ditch then keep digging.

[wagthedog1001]

Don't confuse the Republicans with the facts NOW! They're already really confused trying to listen to what nonsense they're radio people are telling them.

[AprilPA]

Over the last 8 years, Bush was the most fiscally irresponsible President in the history of this country, with the GOP in control of Congress 6 of those years. Their borrow (from China) and spend (in Iraq) philosophy has crippled this country. These debts and deficits will be passed over to our children, our grandchilkdren, our great-gran­dchildren, etc.

[brawnwyn]

You are so right. There was no complaint from Repugs when they sent BALES of money to Iraq to be handed out without any accounting. Everytime Bush turned around he was giving away a billion here and a billion there. There was absolutely no control over defense spending.

The Repugs are just like Robots: wind them up and they spout "tax cuts" for the rich and corporations who already pay less taxes than any place in the world. No wonder we are broke.

[realitychecks]

They can't handle not being able to "pass the buck" to their pockets.

[lagumbo]

It seems that the party of No just can't except the fact that they are not running this country in the ground any further. Now they are concern about spending. They did all they spending they could dream of to put our country in the toilet, now they can't and won't except the fact that PRESIDENT OBAMA and the DEMS have to spend to get us out of this toilet. Please party on No , get lost we don't need you are want you.

[JacksonJones]

Thomas Paine said: "Lead, follow, or get out of the way." The GOP has lead, poorly, disasterously. Now, it's clear they won't follow the will of the people. So, its time for the GOP to get out of the way.

[JayDDrew]

This is obstructionist politics to the Nth degree. Republicans are putting partisanship ahead of this country they claim to love so dearly.

The only logical explanation (if there is one) is the following: the Republicans are willing to bet that it will take longer than two years to turn this economic ship around. Thus, in late 2010, they can claim the Dems have been in charge without listening to them, and they can swing voters back their way.

Isn't it ironic the Republicans screwed this economy so badly they don't think it can turn around in two years??

The risk is if the economy does start turning around (which it will eventually) before late 2010, the Dems can say they did it despite the Republicans obstructing every step of the way.
My impression is it will, so Dems should let the Republicans vote against everything the Dems put forward, absolutely don't compromise to give the Republicans any iota of a chance of taking some credit. That way, the Dems can take all the credit. It could then be the deathknell of the Republican party which, as Mr. Stewart points out, can't be trusted to run our economy anyway.

Thanks again, Mr. Stewart.

[slytot7]

If "white males"....­.."the joe six packs" the majority of whom voted for mcCain/palin had not voted the way they did, the republican calculus you just described might be considered silly...ho­wever, that's not the case. The republicans know that they will always have this group behind them and all they need is to "pull the wool" over the eyes of a few women and latinos and bingo! their back in power-

[unite4change]

We need to write these GOP clowns and let them know how we feel. We get them elected, the lobbyists buy them. Poor and middle class Americans don't have anyone lobbying for them except President Obama and other dems.

[Beninn]

They are fiscal conservatives now because this is the "2" of Bush's "1-2 punch", and why he thinks he'll ultimately be vindicated (by government-hating Republicans).

If you're a Republican who wants to put an end to social security, medicare, and all Great Society programs, against the will of the people who like those programs, how do you do it?

You bankrupt the nation so that the programs are starved out of existence. "Can't pay social security benefits because there's no money in the till."

That's what they're up to now with their taking fiscal conservative vows again.

You fight it by shouting over them that the only way to avoid a depression is to spend. The next step is to get debt forgiveness, wipe consumer debt off the books and begin anew. If Republicans balk at that, remind them that it's in the bible, every 7 years all debt is to be forgiven.

[LiberalLo]

These congressional repugs are a bad joke! They never said nay to the most spendthrift administration ever. But now, that they have practically destroyed the country's economy, they don't want to spend anymore, unless, of course, it's to give business more tax breaks than they already get. What the hell is wrong with these people? Do they not know they have to run again in 2 years? Not one vote from them for the stimulus plan. Jeez, talk about cutting your own throat.

[Rule Of Law]

As Joe Stiglitz says--

" The hope that President Obama will be able to get us out of the mess is tempered by the reality that throwing hundreds of billions of dollars at the banks has failed to restore them to health, or even to resuscitate the flow of lending.

Every day brings further evidence that the losses are greater than had been expected and more and more money will be required.

The question is at last being raised: Perhaps the entire strategy is flawed? Perhaps what is needed is a fundamental rethinking. The Paulson-Be­rnanke-Gei­thner strategy was based on the realization that maintaining the flow of credit was essential for the economy. But it was also based on a failure to grasp some of the fundamental changes in our financial sector since the Great Depression, and even in the last two decades."

The bail out is the wrong answer to this problem. And Obama's economic team will really need to put their track shoes on to run away from their free market beliefs that caused it.

[olephart]

The bailout has taken resources away from needed economic incentives. I fault all of the Congressional leaders and at that time both Presidential candidates for not taking a step back and analyzing the situation. The march to the bailout was identical to the march to war, an intermingling of hysterics and hubris. The concept of rewarding institutions that engaged in overtly criminal actions is repulsive. That no oversight of the bailout was even attempted was itself criminal. This will not end well.

[Rule Of Law]

Ole--as usual, I enjoy your logic and your alliteration!

[realpolitic]

Stiglitz also said:

For those of us who always claimed some connection to the Keynesian tradition, this is a moment of triumph, after having been left in the wilderness, almost shunned, for more than three decades. At one level, what is happening now is a triumph of reason and evidence over ideology and interests

Economic theory has long explained why unfettered markets were not self-correcting, why regulation was needed, why there was an important role for government to play in the economy. But many, especially people working in the financial markets, pushed a type of “market fundamentalism”. The misguided policies that resulted ........ had earlier inflicted enormous costs on developing countries

Keynes argued not only that markets are not self-correcting, but that in a severe downturn, monetary policy was likely to be ineffective. Fiscal policy was required. But not all fiscal policies are equivalent. In America today, with an overhang of household debt and high uncertainty, tax cuts are likely to be ineffective (as they were in Japan in the 1990s). Much, if not most, of last February’s US tax cut went into savings.

http://www.ritholtz.com/blog/2008/12/joseph-stiglitz-is-pissed/

[blastit]

what about all that money that went to Halliburton, or BlackWater what about all that money that can't be accounted for that seem to just disapear into thin air into rethugs pockets.

[ceindependence]

I think the republicans started in 1994 with the right intentions and ended up proving the old adage, "power corrupts, absolute power corrupts absolutely"! Factualy the republicans where the ones who balanced the budget, not big Bill. And I think not learning any history the democrats will prove this again. Bush should have never allowed the US to bear the complete cost of the war, that was voted for by Hillary and VP Joe who had the same intelligence information as the president, in Iraq. This was too great an expense in lives and money to be carried alone by the US. The problem is,again, I don't think the democrats paying back all their special intrests from the last eight years will stimulate the overall economy.

[olephart]

Factually, the Democratic Congress, Bush Sr. and Clinton did the heavy lifting that resulted in a balanced budjet. The deficit went down every year Clinton was in office and went up every year Bush was in office. The Republicans in Congress from 95 to 2001 are the same ones who voted to increase the deficit by 4 trillion bucks from 2001 to 2007. Either Clinton kept the lid on tax giveaways and spending or the Republicans went berserk.

[Luigi53102]

Ah yes, the old Clinton didn't balance the budget schtick.

After Reagan/Bush41 tripled the $1 trillion national debt inherited from Jimmy Carter, what happened?

1993-2001: Democratic President, Republicans control congress for six of eight years; national debt increases less than 25%, with much of the increase due to inherited deficit budget.
2001-2009: Republican President, Republicans control congress for six of eight years; national debt doubles, in spite of inherited surplus budget.

What is different here? The President. Go peddle your fairy tales elsewhere.

[JayDDrew]

The facts hurt, don't they? Well stated!
And the same argument can be made from the stock market - it consistently does better under Democratic Presidents than Republicans. (Hoover's stats previously were responsible for a lot of that, now it's compounded by Bush II. They may never catch up!)

Problem is Republican voters listen to fictitious information from the Limbaughs, Hannitys, Malkins and Coulters. Or maybe it's just all in our heads as another prominent Republican, Phil Gramm, recently said. There, that's the ticket. You only THINK you've lost your job! You need to get up, get dressed and go on to work anyway. You're weren't really laid off, it's all in your head!
I'm on my way to get a new "Enron's the greatest" T-shirt from Linens 'n Things, then pick up a tv at Circuit City with my bank card from Indy Bank. I'll just drive my DeLorean.

[LeftRight]

To be fair, Clinton did NOT balance the budget, we still had a deficit until you add in the payroll taxes which are supposed to go to Social Security and Medicare. On the other hand, he WAS the first President since Johnson to have gotten TOTAL federal inlays to exceed federal outlays.