A few days ago, I was stuck in the car for a long drive. Because of the complete absence of progressive talk from Orlando's airwaves, I had no real choice but to listen to the nasal maundering of Mark Levin on the radio. Levin was very upset about the federal deficit.
Interestingly, Levin was a high-level appointee in the Reagan Administration. Dick Cheney, who was Reagan's Defense Secretary and later the Vice President, said 10 years ago that "Reagan proved deficits don't matter."
I must concede that it is rather difficult to reconcile the conflicting statements of these two gentlemen, Messrs. Evidently, they believe deficits are a terrible tragedy when a Democrat is President, and a wonderful gift when a Republican is President.
There has got to be a more objective standard than that.
Here's one: the federal deficit is a problem when long-term interest rates are high, and not much of a problem when long-term interest rates are low. The Federal Reserve dictates short-term interest rates, but long-term rates still are, pretty much, set by the market, in its usual ruthless fashion. (Which is why James Carville said that after he dies, he "want[s] to come back as the bond market. You can intimidate everybody.")
When long-term interest rates are high, a federal deficit competes against and "crowds out" private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as "fiscal policy." When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.
So, by that test, where are we? Well, as I explained last week, long-term U.S. interest rates are at their lowest in history. So what does that tell you about the deficit?
Sorry -- I didn't mention that there was going to be a quiz.
When Ronald Reagan was President, long-term interest rates sometimes exceeded 15 percent -- ten times as high as long-term interest rates today. The market was screaming at the top of its lungs that the Reagan deficit was too high. And today? Silence.
Look around the world. The 10-year note in Greece yields a little less than 30 percent. Pakistan, 13 percent. Portugal and Venezuela, 12 percent. In those countries, the bond market is shouting, "Cut that out!"
Not here.
Thanks to all the deficit-mongering by Mark Levin, Rush Limbaugh, Fox "News," etc., a lot of Americans are scared by the federal deficit. The advice from Democratic pollsters is to go along with this hand-wringing. But there is an alternative: Explain to the American people when a federal deficit is bad, and when it is not.
Like I just did.
Courage,
Alan Grayson
Follow Alan Grayson on Twitter: www.twitter.com/alangrayson
Limbaugh is not thinking very deeply (does he ever?)
Economic growth is all about ADDED VALUE. The engine of economic growth is not just about building things and the manufacture of widgets. Education and public safety also generate economic growth, by adding VALUE, that is, an intangible that people WANT or NEED. Public sector employees provide much-needed services, therefore do indeed contribute to economic growth.
Take a course in ECON 101, Rush. Learn about goods and SERVICES and economic growth.
Kicked out of Congress by the voters.
The deficit as a percent of GDP was much smaller then.
obama and the dems policies have created the inverse of RR,
Faved.
This insane tax-cutting and austerity is just driving the economy right off of the cliff. The more taxes are cut, the weaker the economy gets. Why don't people see this fact?
While Obama hasn't come close to doubling the deficit, other than staving off total economic collapse, what excuse does he have?
The final tally--$5.07 trillion of spending under Bush, $1.44 trillion under Obama. By the way, those figures for Obama are projections from 2009 to 2017. In other words, both presidents are being judged in eight-year time frames. And Bush "wins" the spending contest in a runaway.
If my math is correct, spending under Bush was more than three times greater than that under Obama. Yet we still get bilge like this from the blog of U.S. House Majority Leader Eric Cantor (R-VA): "President Obama Refuses To Acknowledge That His Out Of Control Spending Sparked A Debt Crisis."
http://legalschnauzer.blogspot.com/2011/07/bush-vs-obama-on-spending-its-no.html
Not to mention continuing unemployment benefits for those who aren't in the 1%.
Play with the numbers all you want but the fact is we have DOUBLED SPENDING in the past decade and people like Grayson claim it's just a revenue problem.
BTW, the Bush Tax Cuts are also the Obama Tax Cuts. He extended them and if you want to compare Barack Obama to George Bush on fiscal issues . . . we know he isn't doing very well because Bush may be the most fiscally irresponsible President ever. Being slightly better than Bush is not a plus, it's a travesty.
No, deficits are a problem when the government has squandered completely the trust of people. That explains the longterm trends in the gold and dollar markets, respectively. No trust, no history of doing what's right.
The dollar is rising and gold is now at 1594 but was at 2000. Does that sound like inflation.
http://www.kitco.com/market/
I know it is hard to listen to FAUX and FAUX bidness channel and then try looking at real facts. "Thinking is hard work" ...Bush.
You should stop the condescension. It's gonna bite you in the butt one day.
How is President Obama paying for the national debt again?
He has yet to have a deficit under $1 trillion.