When I was a small boy at the start of the 1950s, my father gave me my first economics lesson. "Bobby," he said with obvious concern, "you and your children and your children's children will be repaying the national debt created by Franklin D. Roosevelt."
I didn't know what a national debt was, but I remember being scared out of my wits.
Dad was wrong, of course. Even though the national debt then was a much higher percentage of the national economy than it is today, it shrank as the economy boomed. My children have never mentioned FDR's debt. My granddaughter (almost 2) will never pay a penny of it.
Dad, now 96 and still in good health, recognizes how wrong he was then. He admits FDR's deficit spending not only won World War II but it also got America out of the Great Depression.
But now another gaggle of deficit hawks is warning us against more federal spending. "The current federal debt explosion is being driven by an inability to stem new spending initiatives," warns Alan Greenspan in Friday's Wall Street Journal, calling for budget cuts and saying "the fears of budget contraction inducing a renewed decline of economic activity are misplaced."
My dad learned from his mistakes. Alan Greenspan obviously didn't.
Contrary to Greenspan, today's debt is not being driven by new spending initiatives. It's being driven by policies that Greenspan himself bears major responsibility for.
Greenspan supported George W. Bush's gigantic tax cut in 2001 (that went mostly to the rich), and uttered no warnings about W's subsequent spending frenzy on the military and a Medicare drug benefit (corporate welfare for Big Pharma) -- all of which contributed massively to today's debt. Greenspan also lowered short-term interest rates to zero in 2002 but refused to monitor what Wall Street was doing with all this free money. Years before that, he urged Congress to repeal the Glass-Steagall Act and he opposed oversight of derivative trading. All this contributed to Wall Street's implosion in 2008 that led to massive bailout, and a huge contraction of the economy that required the stimulus package. These account for most of the rest of today's debt.
If there's a single American more responsible for today's "federal debt explosion" than Alan Greenspan, I don't know him.
But we can manage the Greenspan Debt if we get the U.S. economy growing again. The only way to do that when consumers can't and won't spend and when corporations won't invest is for the federal government to pick up the slack.
For Greenspan now to say we don't need more stimulus -- when 15 million Americans are still out of work, when retail sales are dropping, when the rate of mortgage delinquencies is still in the stratosphere, when Europe and Japan are tightening their belts -- is like Tony Hayward saying the Gulf spill shouldn't worry us.
America's long-term debt bomb is a future problem to be sure. But it has nothing to do with current spending initiatives. It will be due mainly to baby boomers' demands for health care.
Our immediate challenge is to get enough demand back into the economy to pull ourselves out of the deep hole Greenspan helped create. That will require more deficit spending in the short term -- relief to state and local governments, extended unemployment benefits, a one-year payroll tax holiday on the first $20K of income.
The $55 billion jobs bill now before Congress isn't nearly big enough. Yet evidently it's too big for Senate deficit hawks who blocked it Thursday before leaving town. Presumably Greenspan approves of this devastating lack of responsibility.
My father is a wise and loving man. I wish him a wonderful Father's Day (the first of which was celebrated, incidentally, just four years before Dad was born).
Greenspan I can live without.
This post originally appeared at RobertReich.org.
Menachem Wecker: Five Prodigal Son Art Trends for Father's Day
To honor Father's Day the most topical paintings are perhaps those portraying the Prodigal Son, based on a parable from Luke.
Another brave soldier from my area was just killed in Afghanistan. Hot wars and cold cash, Bob.
Someone is paying every minute. Maybe you didn't feel it. Many Ivy Leaguers don't. It's called Money and Power, Bob. Yes, let's get the stimulus to triage some of economic bleeding. But government spending will never stop the economic war. Our children are paying.
Tax the rich,
they didn't make their money on a desert island.
There is plenty of money in the world, it's just clotted in the top 1%.
Automation and technology will render most workers unnecessary.
Without a Swedish or Dutch social system to support and educate the citizens,
Millions will die, homeless.
And then we will have world war.
So Invest in Main Street with green upgrades to all gov building NOW,
or world war.
The lower-income household keeps a greater percentage of its hard-earned money due to the tax cut. Therefore, the cut is biased to the lower-income household.
Besides which, his infrastructure spending was small compared to the WWII spending, which even you FDR deniers agree ended the depression, on debt.
invest in main street, or get war.
He says: "Greenspan I can live without".
No one gets that?
Except for nuclear power, and a small handful of special cases, alternative energy is a laboratory experiement. It is nothing more than an effort by the (so-called and self-declared) Progressive environmentalists to change the traditional political power structure using the fulcrum of eco-friendliness. Eliminate government incentives, and alternative power collapses of its own weight. Look who's pulling for it, their you will find people who want a shortcut to political power.
The expense of nuclear power is being put on the backs of the taxpayers too. If it was such a great deal, why are there not private investors jumping in to cover the costs. Well, again, it is like oil. They want your dependency to assure their profits. Socialism is forbidden to some people but not the "people" called corporations. At approximately 1 kW per square meter, the potential of solar energy is 1 GW per square kilometer, a very large nuclear power plant on the third of a section. When the tipping point hits, investors will be left wondering again (why they didn't invest in a company like Xerox).
Since the economy would expand as ppl spend more - buying more products & services - then those who are investing in IRAs, SEPPs etc., have less money to "spend". Is the personal retirement account program contributing to the lack of growth? Or because much of the money is invested in stocks/bonds/CD's etc does that offset the funds not being spent on Main Street?
My husband & I are over 50 and preparing for retirement within the next 15-20 years, we have been max'ing our contributions. So we are not spending roughly $20,000 - when you think their are millions of couples out there doing the same - I would think it DOES have an economic impact.
Any studies or comparisons out there?
Buying gadgets you don't need (i.e. Mr. Reich's "solution") to support the consumer economy is a wrong-headed at best.
Good luck!
Greenspan certainly helped get us in this mess with artificially low interest rates but the fact that he is willing to admit the problem is a start.
It has been and continues to be nearly impossible for businesses to find the low interest funds necessary for expansion and the creation of jobs.
A solution may involve the establishment of government direct funding under low interest guidelines. If it can be done for the banks, it can be done for business.
If this administration had real concern for small and medium sized businesses it would charter a publicly owned national bank to compete with the privately owned Federal Reserve Bank.
The only possible government spending that makes any sens is infrastructure upgrades that we can charge for as they are used. think about it for five seconds.
What is your intent with the "under water" issue? Do you think the banks should let people walk away from their obligation? Or do you not?
If you can't find a job, there is always the option of becoming self-employed, please consider that. it can lead to great things (or be a real pain in the rear).
"Money has become the everything in this economy." That's why they call it an "economy", it's about money, not self-worth, community service, or value as a human being. All it's ever been about is money. For those other things, you go to other institutions (government, church, school, etc).
We're not a Third World economy yet, but we are headed that way.
Investing is for everyone. I don't know anyone who doesn't have discretionary expenses they couldn't trim to free up $20/month. After ten years, with a little attention, that's $5,000, which is a start. As long as you think you have to be wealthy to invest, you may never get started, and then those who do will have the benefits to themselves.
I understand that you're frustrated, but checking out won't make anything better.
We already had one, remember? The $787 billion one... last year.
How did it work out?
And please... don't say that "... without that one, things might've been worse..." since you don't know that; nobody knows that.
What we DO know is that it didn't jump start anything.
Didn't create jobs.
Didn't stimulate consumer spending.
Didn't have any effect whatsoever, by any way you choose to measure it.
Now, your solution is repeat procedure?
There is a definition for people who keep doing the SAME thing and expect different results.
I'm disappointed Mr Reich... I truly am. One of the reasons I'm here is to read your thoughts on national economy. Sadly, you choose to write about politics.
What would help is to remove the tax cuts to the rich and truly have a works project to improve the infrastructure and development of renewable energy.
Ref: http://www.breitbart.com/article.php?id=D9GGCVE00&show_article=1
Read it and weep, you are given a peek into the future.