If Reagan were resurrected and could recognize the Republican party well enough to run for it 2012 presidential nomination, his record alone would disqualify him.
"The Obama-Pelosi-Reid agenda will leave us less secure, more in debt and under the thumb of big government," she added, saying voters all over the country are sending a message that they want change in Washington.
She harkened Obama's famous campaign slogan, asking, "How's that hope-y, change-y stuff working out for you?"
The deficit numbers — a projected $1.3 trillion in fiscal 2011 alone — are breathtaking. What is even more breathtaking is the Republicans’ cynical refusal to acknowledge that the country would never have gotten into so deep a hole if President George W. Bush and the Republican-led Congress had not spent years slashing taxes — mainly on the wealthy — and spending with far too little restraint. Unfortunately, the problem does not stop there.
The Republican amnesia and posturing are playing well on the hustings, where Americans are deeply anxious about the economy and fearful of losing their jobs and homes. Far too many Democratic lawmakers are losing their nerve.
Americans should be anxious, for reasons including the huge deficit. But the cold economic truth is this: At a time of high unemployment and fragile growth, the last thing the government should do is to slash spending. That will only drive the economy into deeper trouble.
HOW DID WE GET HERE? When President Bush took office in 2001, the federal budget had been in the black for three years, and continued surpluses were projected for a decade to come.
By the time Mr. Bush left office in early 2009, the government had run big deficits for seven straight years, and the economy was on the brink of another Great Depression. On Jan. 7, 2009 — two weeks before Mr. Obama was inaugurated — the Congressional Budget Office issued new budget estimates showing a fiscal year 2009 deficit of well over $1 trillion.
About half of today’s huge deficits can be chalked up to Bush-era profligacy: mainly cutting taxes deeply while borrowing to wage two wars and to enact the Medicare prescription drug benefit — all of which Republicans supported, virtually in lockstep.
The other half of recent deficits is due to the recession and the financial crisis.
As you can see, it's not even close: only 1 in 10 Democrats and 1 in 4 independents agree with the Republican argument that cutting federal spending will create jobs. In fact, nearly 4 in 10 Republicans disagree.
Overall, nearly half of Americans believe the Republican philosophy of cutting federal spending will actually eliminate jobs.
It is true that everything else being equal, it's better to have a balanced budget than a budget deficit, but the mistake people make when obsessing on the deficit in 2010 is that all things aren't equal. Right now, we need to create jobs to sustain the economic growth that will generate the tax revenue that brings the budget back into balance. Cutting federal spending will take us in the opposite direction, eliminating jobs and hurting the economy.
Fortunately, despite the media's nonstop deficit hawk hype, a solid plurality of Americans understand that cutting federal spending is bad for job growth, and only one in four hold the misguided view that cutting spending will create new jobs.
To be clear, this doesn't mean Americans support wasteful government spending. Obviously (almost by definition), they don't. But it's not the spending that they oppose -- it's the waste.
Let’s talk for a moment about budget reality. Contrary to what you often hear, the large deficit the federal government is running right now isn’t the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met — appropriately — with temporary measures to stimulate growth and support employment.
The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.
True, there is a longer-term budget problem. Even a full economic recovery wouldn’t balance the budget, and it probably wouldn’t even reduce the deficit to a permanently sustainable level. So once the economic crisis is past, the U.S. government will have to increase its revenue and control its costs. And in the long run there’s no way to make the budget math work unless something is done about health care costs.
But there’s no reason to panic about budget prospects for the next few years, or even for the next decade. Consider, for example, what the latest budget proposal from the Obama administration says about interest payments on federal debt; according to the projections, a decade from now they’ll have risen to 3.5 percent of G.D.P. How scary is that? It’s about the same as interest costs under the first President Bush.
A spending freeze might be what Americans envision when they think about deficit reduction. The only problem is, it won't do much to reduce the deficit. As the Economist pointed out, "Mr. Obama has apparently concluded that the electorate can't be expected to handle anything like a real description of the tough decisions which must be made."
The spending freeze exempts entitlement programs. That is: It's focusing on the part of the budget that's not a problem. Social Security, meanwhile, is on a perfectly manageable trajectory. It's Medicare and Medicaid -- whose rate of spending is driven by the rest of the health-care system -- that break the budget. That's why health-care reform was so important to former Congressional Budget Office director Peter Orszag, and why the administration pushed so hard for a deficit-improving bill that included an independent Medicare Commission empowered to control Medicare costs.
But the effort was wasted, at least from a public relations perspective. A January poll conducted by the Kaiser Family Foundation found that 60 percent of Americans thought the health-care reform bill would increase the deficit, and only 15 percent thought it would reduce it. The presidential speeches, the Congressional Budget Office's estimates, the letters signed by dozens of leading economists -- none of it had worked.
According to The New York Times, 37 percent of the 2009-2012 deficit stems from the recession itself, because of revenue losses and increased automatic relief outlays. Another 33 percent reflects Bush-era tax cuts and Bush programs like the Medicare drug benefit (with its generous subsidy for drug companies). The military build up added 20 percent more. Only 7 percent came from the Obama stimulus; all other new domestic spending adds just 3 percent. The president should be helping citizens sort this out, not caving in to the fear-mongers.
Long-term fiscal balance is necessary policy, but we can reduce the debt burden without slashing social outlay. That's exactly what we did during the quarter--century boom after World War II, when we combined high growth rates, modest budget deficits, progressive taxation, a declining debt burden -- and increases in social spending. That growth was partly driven by public investment.
The current argument about deficits and debts conflates several entirely distinct issues. Do we need bigger economic stimulus now to promote a faster recovery? (Yes.) Should we reduce deficits and the ratio of debt to GDP once a strong recovery comes? (Yes.) Does this require an extra-legislative commission? (No.) Do we need to slash social insurance in order to achieve fiscal balance? (No.) Are there other ways to get to a sustainable budget? (Most definitely.)
The record $438 billion shortfall for the budget year that ended last week is up from $162 billion posted last year. The previous record of $413 billion was posted in 2004.
CBO said Tuesday that with the economy in a slump, revenues dropped by almost 2%. Corporate income receipts dropped by $65 billion, or nearly 18%. At the same time, individual income tax revenues declined by 1.6%.
At Tuesday morning’s meeting of the House Democrats, caucus chairman John Larson rallied his colleagues for the day’s debt-limit debate by playing an audio recording of the 40th president.
“Congress consistently brings the government to the edge of default before facing its responsibility,” Reagan says in the clip. “This brinkmanship threatens the holders of government bonds and those who rely on Social Security and veterans benefits. Interest rates would skyrocket, instability would occur in financial markets, and the federal deficit would soar. The United States has a special responsibility to itself and the world to meet its obligations.”
“Kind of sums things up,” Larson said, playing the same clip again at a news conference.
If Reagan were resurrected and could recognize the Republican party well enough to run for it 2012 presidential nomination, his record alone would disqualify him.