National Debt, Starve the Beast, & Wealth Disparity

See the actual cartoon at this link.

Bill Clinton steadily reduced the debt increase while he was in office, thanks largely to the 1993 Debt Reduction Act* that was OPPOSED BY EVERY SINGLE REPUBLICAN IN CONGRESS, led by Newt Gingrich! The Republicans claimed that the Debt Reduction Act would result in HIGHER deficits and also result in an economic recession during President Clinton’s term. Obviously, with hindsight they were completely wrong. Republicans don’t seem to be very good at math, or economics.

Now, after 20 years of huge Republican deficits and Republican recessions, the National Debt has increased from $937 Billion — LESS than $1 Trillion — the day Ronald Reagan took office to ALMOST $10 TRILLION!!! The Debt has increased more than TEN TIMES what it was when Ronald Reagan promised to reduce the National Debt by 1983! We and our children and their children will be paying off the debt added by Ronald Reagan, George H.W. Bush and George W. Bush for the next 100 years and more! For what !?!? Services have been cut across America. Police and Fire Departments haven’t grown nearly as fast as our population. Even the number of troops in the military has been cut while military spending has skyrocketed!

[ . . . ]

Back in the 1980s Senator Daniel Patrick Moynihan repeatedly complained that Ronald Reagan was running up the national debt in order to bankrupt the USA so that the Federal government could no longer afford any of its social programs, from Aid to Families with Dependent Children to Social Security to Medicare to veterans’ benefits. He was right, but hardly anyone listened.

The Republicans are still trying to bankrupt the Federal government and they’re still trying to eliminate every Federal social program, not only the remnants of FDR’s New Deal but even going back to Teddy Roosevelt’s conservationist programs.

[ . . . ]

The last non-conservative Republican President, Dwight D. Eisenhower, actually DECREASED the National Debt three of his years in office. Eisenhower’s predecessor, Democratic President Harry Truman ALSO DECREASED the National Debt three times, but by far more than President Eisenhower did, in the years following the Second World War.

[ . . . ]

* (1996) A number of Republicans have sent e-mails complaining that the Congress was Democratic while Ronald Reagan was President. Unfortunately, only half the Congress was Democratic during President Reagan’s first 6 years in office, when the entire National Debt more than DOUBLED. The upper house of Congress, the U.S. Senate, had a Republican majority during those six years, which comprised most of President Reagan’s time in office. That’s why Bob Dole was the Senate Majority Leader while Reagan was President. Those Republicans also don’t seem to know that any Bill passing out of Congress had to be approved by BOTH Houses of Congress, even by the Republican Senate! Furthermore, to go into Law a Bill must be signed by the President — none other than Ronald Reagan during those critical years! President Reagan almost TRIPLED the National Debt during his eight years in office!

(1996) Other Republicans have written that the above chart couldn’t possibly be correct, because the “National Debt Clock” clicks UP all the time! Well, whoever programmed that “Clock” set its algorithm to INCREASE every second. But whoever maintains the Web site surreptitiously “adjusts” the numbers every evening after the Bureau of Public Debt publishes its new, up-to-the-minute, National Debt figures. For instance, in October 1996 the National Debt actually went DOWN over several weeks, but the “National Debt Clock” ticked UP every second of those weeks. Yet, from one day to the next the National Debt Clock’s level was often LOWER than the day before, without the “Clock” ticking backwards once!!! Must be post modern math! Perhaps that’s why the CBS finally stopped showing that “Clock” on its Evening News! Also, based on the records of recent Presidents, the “National Debt Clock” should tick upwards at a much faster rate for Republican Presidents, which it doesn’t. If you want to see the true level of the National Debt, just visit the Bureau of Public Debt website. (That text was written for the 1996 version of this chart; it is even more apt after eight years of “President” George W. Bush.)

This decline in real wages, beginning in the late 1970s and accelerating sharply in the 1980s under Reagan, is also a crucial link in understanding why inflation did not rise up as unemployment fell in the 1990s, contrary to expectations of virtually every single economics textbook. The standard theory held that when unemployment gets too low, workers gain in bargaining strength. They then push up wages, and businesses pass along these additional costs in the prices they charge consumers. This means rising inflation. But beginning in the 1990s under Clinton, unemployment fell, to as low as 4.0 per cent in 2000, but inflation stayed low. What happened?Former Federal Reserve Chair Alan Greenspan’s own answer to this question (as reported by Bob Woodward in Maestro, his book-length hagiography of Greenspan) was that U.S. workers had become increasingly “traumatized” in the 1990s, and as such did not feel sufficiently secure to attempt to bargain up wages even at low unemployment. …if one would have to pick the single most important turning point over the past 30 years in the treatment of U.S. workers, I would choose Ronald Reagan’s decision to summarily fire more than 11,000 air traffic controllers who, as members of PATCO, the air traffic controllers’ union, went on strike eight months into Reagan’s presidency, in August 1982. This early attack by Reagan was followed by eight years of relentless hostility to the organized working class.

But Reagan did not attack the organized working class only. More broadly, Reaganomics entailed a dramatic new framework for fiscal policy, the area in which Mr. Roberts was likely to have primarily involved as a Treasury official. Reagan’s fiscal program was fundamentally about tax cuts for the rich, a massive expansion in military spending, sharp reductions in social expenditures, and an acceptance-or better still, an embrace-of large-scale federal government fiscal deficits on these terms. All of this should have a familiar ring to those who have followed the course of economic policy under George W. Bush.

No doubt Mr. Roberts recalls President Reagan’s frequently recounted stories about “welfare queens” driving to pick up government checks in their Cadillacs. It was through repeating stories like this that Reagan was able to build support for an assault on even the minimal welfare state programs that had been operating prior to his taking office. It is no surprise that the individual poverty rate rose from 11.9 per cent under Carter to 14.1 per cent under Reagan. ..large-scale fiscal deficits create persistent pressure for a permanent contraction in social spending by the federal government… Remember the Reaganites, as with the Bush group, apparently experienced few qualms about throwing more money to the military while cutting taxes for the already overprivileged

I believe that to a large extent our current budgetary problems stem from the widespread adoption of an idea by Republicans in the 1970s called “starve the beast.” It says that the best, perhaps only, way of reducing government spending is by reducing taxes. While a plausible strategy at the time it was formulated, STB became a substitute for serious budget control efforts, reduced the political cost of deficits, encouraged fiscally irresponsible tax cutting and ultimately made both spending and deficits larger.

Ever since Ronald Reagan, the GOP has been run by people who want a much smaller government. In the famous words of the activist Grover Norquist, conservatives want to get the government “down to the size where we can drown it in the bathtub.”

But there has always been a political problem with this agenda. Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait-and-switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

So the beast is starving, as planned. It should be time, then, for conservatives to explain which parts of the beast they want to cut. And President Barack Obama has, in effect, invited them to do just that, by calling for a bipartisan deficit commission. [ . . . ]

Why are Republicans reluctant to sit down and talk? Because they would then be forced to put up or shut up. Since they’re adamantly opposed to reducing the deficit with tax increases, they would have to explain what spending they want to cut. And guess what? After three decades of preparing the ground for this moment, they’re still not willing to do that.

In fact, conservatives have backed away from spending cuts they themselves proposed in the past. [ . . . ]

At this point, then, Republicans insist that the deficit must be eliminated but they’re not willing either to raise taxes or to support cuts in any major government programs. And they’re not willing to participate in serious bipartisan discussions, either, because that might force them to explain their plan — and there isn’t any plan, except to regain power.

But there is a kind of logic to the current Republican position: In effect, the party is doubling down on starve-the-beast. Depriving the government of revenue, it turns out, wasn’t enough to push politicians into dismantling the welfare state. So now the de facto strategy is to oppose any responsible action until we are in the midst of a fiscal catastrophe.

In another Fall 2009 article, University of Mississippi economist Andrew T. Young found, contrary to starve the beast theory, that “tax increases-even temporary-may serve to decrease expenditures by forcing the public to reckon with the cost of government spending.”

In the Spring 2009 issue of the Brookings Papers on Economic Activity, University of California, Berkeley, economists Christina Romer and David Romer published an article examining the history of tax changes, which found “no support for the hypothesis that tax cuts restrain government spending; indeed, they suggest that tax cuts may actually increase spending.”In a Summer 2007 article, I thoroughly reviewed the history and development of starve the beast theory. I identify Alan Greenspan’s July 14, 1978, testimony before the Senate Finance Committee, shortly after passage of Proposition 13 in California, as the point at which starve the beast theory started to become Republican orthodoxy. Said Greenspan on that occasion, “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenues available and trust that there is a political limit to deficit spending.”

In a Fall 2006 article, Cato Institute economist Bill Niskanen found three major problems with starve the beast theory: “(1) it is not a plausible economic theory; (2) it is inconsistent with the facts; and (3) it has diverted attention away from the political reforms needed to limit government growth.” He concluded that it is a “fantasy” to think that tax cuts would even restrain spending growth.

In a November 15, 2004, article, Brookings Institution economists William Gale and Peter Orszag looked at whether the tax cuts of the George W. Bush administration were restraining spending and found no evidence; on the contrary, they found that the abandonment of fiscal discipline on the tax side of the budget encouraged a reduction in fiscal discipline on the spending side as well.

But decrying Republican “invincible ignorance” on the connection between tax cuts and deficits misses the point about what’s going on here. We just haven’t reached the endgame that determines whether starving the beast really works. But if California’s experience is any guide, that day will come.

If you judge the point of “starving the beast” as a strategy not to cut spending, but to break government, it all starts to make sense. By making it essentially impossible to raise taxes in California on those most able to pay, conservatives ensured that when the state hit hard times, it would have no tools to deal with a severe downturn in state revenues. California is headed for another big budget shortfall this year, and there will inevitably be more cuts in state services — particularly those aimed at the most vulnerable sectors of society, but also at the guts and sinew of basic government infrastructure — schools, police, firefighters.

For the GOP, that’s not a bug in the program, it’s a feature! We haven’t yet reached that point with the federal government, due to the fact that the U.S. can run a deficit, and California can’t, in combination with the low cost at which the U.S. can currently borrow money. But if Republicans hold the line on no new taxes, and at the same time continue their pattern of decades of failure at making politically unpopular cuts in entitlement spending, the U.S. will someday reach a point at which it is no longer so simple to operate in the red. Borrowing costs will rise, threatening either severe inflation, or the requirement of real spending cuts.

And then the U.S. government will break, just like California has. In that scenario, “starve the beast” succeeds.

If government can create conditions that cause a middle class to emerge, by implementing fair rules for business, progressive taxation, and free public education, the opposite is also true: government can create a corporatocracy by deregulating business, by cutting taxes on extreme wealth, and by privatizing as much of the commons as possible. Cons call this “starving the beast.”

Here’s how you starve the beast: you put through tax cuts for the rich, which cuts back the revenues of the federal government to the point that, if you got rid of all the social programs, you’d have a balanced budget. No more Social Security, no more spending for education, no more spending for Medicare and Medicaid; have the government simply keep the armies, prisons, and police. Let’s shrink government– that’s their philosophy.

When you cut all those social programs, you lose the middle class and in its place create a very small, very wealthy elite and a large underclass of starvation-wage workers. You lose democracy and instead create corporatocracy. You change the rules of the game; We the People lose, and the feudal lords win.

Cons have been winning this particular game of “starve the beast” since Reagan first started seriously playing it in 1981. They’ve done it in large part by lying to the American people; and they’ve had to do that because if they told the truth the majority of Americans would throw them out of office.

This is, after all, still a democracy. If the majority of us agree to get rid of Social Security so that only the wealthy can have retirement benefits and the old are left to fend for themselves, so be it. If a guy breaks his back and can’t work and the majority of us decide not to help people who are disabled, and as a result he has to beg on the street, well, we can democratically decide to screw him and ourselves.

But the cons are not having this debate in an open and honest fashion. They are not asking We the People if we want to get rid of, for example, the Head Start program. They could ask, “Do we want to invest in our youth now or not?” We know that if we invest in educating the very young, fewer of them will become criminals. It will save us money over the long term. But if the majority of us say, “No, we would rather pay $50,000 to imprison them later than pay $300 to put them in Head Start now,” then fine, it’s a democracy.

But that’s not the way the cons are doing it.

Instead of explaining why it would be better for Americans to give all their money to a corporate elite, they’re giving huge tax cuts to the rich while pretending that the tax cuts benefit all Americans.

Instead of arguing that Americans should not expect the right to health care or security in their old age, they are prompting a government crisis by handing to the rich money they’re borrowing from China, Japan, and Korea in the name of our grandkids. We are borrowing so much money from these countries that if they so much as blink, our currency could crash.

And that’s just what the most ideological of the con elite want. They want an economic crisis because they figure that’s the only way they can force a cut in spending on social programs.

In 2004 they thought they had starved the beast enough and sent Bush out on the campaign trail to advocate getting rid of Social Security– privatizing it, putting it in the hands of Wall Street. But it didn’t work. Turns out We the People apparently like Social Security. So the cons went back to starving the beast. Bush instead passed a new series of tax cuts, with more to follow.

The cons are trying to play the game so that the rich benefit while the rest of us lose out. They get tax cuts, and we get program cuts. That’s not the “free” market. That’s a market that’s being created for the benefit of the rich at the expense of the middle class.

George Lakoff, Moral Politics, pp 194-6:

The conservative political agenda, for example, is not merely to cut the cost of government. The conservative agenda, as we shall see, is a moral agenda, just as the liberal agenda is.

Consider, for example, the issue of the deficit. How did it get so large?

Liberals like to think of Ronald Reagan as stupid. Whether he was or not, those around him certainly were not. While constantly attacking liberals as big spenders, the Reagan and Bush administrations added three trillion dollars to the national debt by drastically increasing military spending while cutting taxes for the rich. They could count; they saw the deficit increasing. They blamed the increases on liberal spending, but Reagan did not veto every spending bill. Moreover, Reagan’s own actions acounted for much of the deficit increase. Had financial responsibility and the lessening of spending been Reagan’s top priorities, he would not have allowed such an increase in the defiicit, simply by not cutting taxes and not pushing for a military buildup far beyond the Pentagon’s requests.

While the deficit was increasing, there was a vast shift of wealth away from the lower and middle classes toward the rich. Liberals, cyncally, saw this shift as Reagan and Bush making their friends and their political suporters rich. Certainly that was the effect. It is hardly new for the friends of supporters of politicians in power to get rich. This is usually seen as immorality and corruption, and with good reason. Many liberals saw Reagan that way.

But Ronald Reagan did not consider himself as immoral. Certainly he and his staff could tell that their policies were producing vast increases in the deficit, when they had come into office promising a balanced budget. Reagan was not forced to pursue deficit-increasing policies. Why did he do so?

I would like to suggest that he pursued deficit-increasing policies in the service of what he saw as overriding Moral goals: (1) Building up the military to protect America from the evil empire of Soviet communism. (2) Lowering Taxes for the rich, so that enterprise was rewarded not punished. Interestingly, for President Reagan as for any good conservative, these policies, however different on the surface, were instances of the same underlying principle: the Morality of Reward and Punishment.

What was evil in Soviet communism, for Reagan as for other conservatives, was not just totalitarianism. Certainly Soviet totalitarianism was evil, but the U.S. had supported capitalist totalitarian dictatorships willingly while overthrowing a democratically elected communist government in Chile. The main evil of communism for Reagan, as for most conservatives, was that it stifled free enterprise. Since communism did not allow for free markets (open to Western companies) or for financially rewarding entrepreneurship, it violated the basis of the Strict Father moral system: the Morality of Punishment and Reward.

Adding three trillion dollars to the deficit actually served a moral purpose for Ronald Reagan. It meant that, sooner or later, the deficit would force an elimination of social programs. He knew perfectly well that the military budget would never be seriously cut, and that a major increase in tax revenues to eliminate the deficit would never be agreed upon. In the long run, the staggering deficit would actually serve Strict Father morality – conservative morality – by forcing Congress to cut social programs. From the perspective of Strict Father morality, Ronald Reagan looks moral and smart, not immoral and dumb as many liberals believe.

File:Share top 1%.jpg

Share of pre-tax household income received by the top 1%, top 0.1% and top 0.01%, between 1917 and 2005.[9][10]



11 thoughts on “National Debt, Starve the Beast, & Wealth Disparity

  1. By the way, I should point out that only the very first sentence in this post was written by me. All the rest of the writing is excerpted from the links.

    I’m putting my own commentary in a separate post. I should be finished with it soon.

  2. The new glasses that Lakoff provides for looking at the issue is actually quite enabling; one can find the whole rationale quite coherent.

    But that’s not the essence of statecraft. Perhaps, politicians lose sight of that fundamental bit of statecraft. It’s sad.

    • I decided to add Lakoff’s commentary after I had already posted all of this. It’s easy just to criticize, but Lakoff explains the motivation. When I first read this passage from Lakoff’s book, it was eye opening. The deficit increasing policies of Republican presidents made no sense to me in the past. It seemed like utter insanity. Even Reagan argued for fiscal responsibility all the while spending like there was no tommorrow.

      I’ve always understood that everyone, or nearly everyone, believes they are doing good… even if the rationalized “good” doesn’t make sense from the perspective of others. Conservatives genuinely believe in this concept of moral order which is essentially hierarchical. From the liberal morality of egalitarianism, conservative morality seems wrong… and vice versa. Conservatives genuinely believe in meritocracy, but their moral vision seems to blind many conservatives from seeing that our society is far from being meritocratic… or, if they do see it, they blame the lack of meritocracy on the government. As a liberal, I find it strange the idea that, if govt could be eliminated or weakened, capitalism would operate as a true free market and idealisitic meritocracy would solve all the world’s problems.

      In the conservative worldview, I see this obvious disconnect between ideology and the facts. I don’t think this is just my liberal bias. I can’t count the times I’ve had a conservative dismiss or rationalize away facts that disagreed with their beliefs. I really do think there is a different way the average conservative thinks from how the average liberal thinks.

      For example, countries with legalized abortions have lower rates of abortions than countries where abortions are illegal. This may seem counter-intuitive, but it only seems that way because we’ve been indoctrinated by certain ideologies. Pro-lifers claim they want to lessen the number of abortions, but what they don’t understand is that pro-choicers also want to lessen the number of abortions. No one is for increasing abortions just for the fun of it. If pro-lifers were serious about wanting to decrease the number of abortions, then going by the data they should support legalization. But I think that misses the point. The conservative argument has nothing to do with practical reality and everything to do with morality. According to conservative morality, aborition is just plain wrong and so it would be wrong to sacrifice moral principles merely for practical results. Even if less women chose abortion, it would still be wrong that the state condones abortion by making it legal. It’s just wrong and the data just doesn’t matter. Wrong is wrong.

      Another example is sex education. Conservatives prefer abstinence only sex education. The problem is that abstinence only programs have been proven to increase the numbers of pregnancies and STDs among teens. This data has become widely known and yet conservatives continue to argue for abstinenence only. Teaching kids how to protect themselves is wrong because the conservative thinks this teaching implies a condoning of teen sex…. which, of course, is wrong. It’s better to teach kids sex is bad even if it means they have sex anyways than to teach kids the objective facts. Wrong is wrong.

      As a liberal, I’m confused by why the data shouldn’t matter. Isn’t morality about making the world a better place. Are many conservatives simply pessimists about making the world a better place? Does this come from the fundamentalist Christian perspective that the world is fallen and one’s reward is in heaven, not on earth? Is this the same reason why many conservatives seem so unconcerned about environmental destruction?

      Moral principles are very important to a conservative, more important than anything else. Since, traditionally speaking, moral principles came down from God in Heaven, it was the responsibility of humans to strive to conform to God’s moral law and not the other way around. Even if God’s moral law fails to create moral behavior, it remains moral because how could God ever be wrong? This dismisses the fact that humans, including fundamentalists, are forced to interpret God’s Word which requires picking and choosing among confusing and often contradictory messages in the Bible.

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