A little wisdom from Dean Baker
--Dean Baker
March 14, 2009
It's Bush's Deficit, the Republicans Are Not Telling the Truth
As a general rule, politicians will say anything that they think they can get away with which will advance their agenda. Truth is not usually a major consideration. That applies to politicians of both political parties.
In principle, the media places a limit on politicians' ability to lie, since calling your opponent a murderer is likely to backfire if the headline reads "Senator Fabricates Murder Story."
Unfortunately, budget reporters largely fall down on the job. Hence we get the headline "Obama's New Tack: Blaming Bush," with the subhead "Points to 'Inherited' Economy."
Okay, let's get serious folks. It is not a "inherited" economy, it is a inherited economy. There is no dispute that the economy was in horrible shape at the time that President Obama took office. Anyone who tries to say otherwise is simply lying.
Furthermore, the overwhelming majority of the budget deficit that the Republicans are now complaining about is directly attributable to President Bush's policies. The additional deficit for 2009 that it is attributable to President Obama's efforts to fix the disastrous economy that he was handed by President Bush is trivial in comparison, as can be clearly seen. (The projections are taken from CBO).
--Dean Baker
Posted at 03:58 PM | Comments (15)
Has Senator McCain Taken Leave of His Senses?
That might have been the better headline for an article that referrs to Senator McCain's description of the borrowing needed to finance the budget deficit "generational theft." While Senator McCain has repeatedly said that he doesn't know much economics, this one is really over the top.
The basic story is that the borrowing is making future generations richer, not poorer. The stimulus will increase GDP and therefore increase investment, since companies will invest more in plant and equipment, if they see an increase in demand. This private investment will increase the economy's productivity, thereby making our children and grandchildren richer. In addition, much of the spending in the stimulus will directly increase productivity, such as money for retrofitting buildings to make them more energy efficient, putting medical records on-line, or increased funding for college education.
The debt that will be used to pay for this will be an asset for at least some of our children, since at some point we will all be dead and our heirs will have possession of the bonds we hold today. (The fact that China and other foreign countries own some of the debt doesn't change the story. China's buy U.S. assets to keep up the value of the dollar to preserve their export market. If they didn't buy government debt, they would buy other assets, like stocks and bonds of private companies, which would result in a comparable flow of future income going to China. The problem here is the over-valued dollar, it has nothing to do with the budget deficit.)
It is especially remarkable that Senator McCain would make such a bizarre comment about "theft" from future generations given that they just have been handed an immense gift from the collapse of housing and stock prices. The decline in house prices means that they will be able to buy the nation's housing stock for about $6 trillion less than they would have paid two and a half years ago. The decline in the stock market means that they can buy the country's stock of productivity capital for about $10 trillion less than they would have paid two years ago.
The fact that Senator McCain could make such an incoherent complaint about younger generations being mistreated, after they have just seen a transfer of close to $16 trillion in wealth from older generations, warrants attention from the media. It is far more newsworthy than President Obama's comment's about "bitter" working class voters that received so much attention during the primaries.
--Dean Baker
It also would have been helpful, if the
Posted at 03:32 PM | Comments (3)
March 13, 2009
The New York Times Wants to the Government to Increase the Unemployment Rate
That is presumably the meaning of the statement about the "federal government’s deepening fiscal difficulties." The New York Times may not like the current level of government spending or deficit, but that is the view of the reporter or the editor. It is not an objective fact that the government has "deepening fiscal difficulties."
In fact, the government can borrow long-term money at far lower cost than at any point in the last 50 years. The financial markets obviously do not agree with the NYT's assessment of the government's fiscal situation.
The most obvious effect of reducing the budget deficit right now would be to raise the unemployment rate, slow economic growth, and lower investment, thereby leaving a less productive economy for our children and grandchildren. While some deficit reduction cults may view this as a positive economic path, there are not many economists who would agree with this position.
--Dean Baker
Posted at 10:50 PM | Comments (9)