1 Boring Old Man

With all the wet noodles thrown at the wall, the one that is sticking best is the charge that the Democrats [Obama] are big spenders. And, for the moment, that is true – absolutely and relatively. What follows is a State of the Debt retrospective beginning with Reagan [when deficit spending became the Republican norm]. Here’s the graph I usually post about the National Debt:

Expressing the debt value corrected by the GDP is a way of correcting for the inflationary forces that are part of our Market Capitalism. The next few graphs in this post are uncorrected – the raw numbers. Here’s the "Budget" [Quarterly] since Reagan [from the Bureau of Economic Analysis – http://www.bea.gov].

To me, it tells a sad tale – a shortsighted tale. You recall that, like Obama, Reagan started [and ended] with a Recession.

 

 

His way way of stimulating the economy was not a Stimulus Package but rather some massive tax cuts. The effect on the economy is pretty much the same – but Presidents and Congress usually pick the one that most fits their other agendae. Looking at the graph below, Reagan did little to change spending. If anything Clinton underspent Reagan or the Bushes. Since spending increases yearly, this graph shows the increase/year for the period under examination. Obviously, the big news here is the spending under the war-mongering Bushes.

Now let’s hone in on the data from the George W. Bush years. Reagan had used a modified Keynesian approach to the Recession that met him as he came into office. He cut taxes ["trickle down economics"]. But neither he nor George H.W. Bush ever dealt with the fact that they were running up the debt at a rate unseen since World War II. That’s the problem with the tax-cut solution to a Recession. There’s no pay-as-you-go built in. The fall in revenue that accompanies any Recession is amplified by the lost revenue from the tax-cuts. The people get needed relief at the expense of accelerating debt.

Bush started his term with a Recession [the "dot com bubble"] and 9/11, but in his case, the tax-cuts had little to do with those things. He cut taxes because his elite base didn’t want to pay them. It didn’t take long for him to eat up Clinton’s surplus and reconvene us on a path to bankruptcy.  His tax cuts kept us in a state of deficit financing throughout his terms of office, and the deficits [the green line] really added up [the purple line]. Like Reagan and his father, he never even got back to zero. This has always confused me. In spite of all their talk of fiscal responsibility and small government, neither George W. Bush, George H.W. Bush, nor Ronald Reagan ever balanced the budget.

Now, about Health Care costs. This graph shows the problem there:

^{from: Growth in Health Care Costs, Committee on the Budget United States Senate}

The extrapolation in red is my own as their data stopped at 2005 [I believe we are actually at 17%]. Health care costs are rising much faster than inflation, tripling in the last 45 years, even when corrected for inflation. That can’t keep happening, thus the push to regulate health care costs and to make health care available to all people. This isn’t an optional task, it’s an essential task. Discussions of why these costs have soared are interesting but irrelevant. No argument about the wonderful new technology and advanced drugs in medicine matters if it’s only available for the few. I think of it as the medical bubble, hiding behind science. We’re living longer by tiny increments, not by anything that would explain the inflation of costs.

The Problem: Obama couldn’t cut taxes to deal with the current Recession/Depression if he wanted too. His Republican predecessors have used up that option. In fact, he has to increase government spending [the Stimulus] and, sooner or later, he will have to raise taxes. Second, Obama has to pass a Health Care Package to insure Health Care for all and to get control of Health Care costs. In neither case does he have a choice – no choice at all – nada. So, there’s nothing he can say to counter the accusations of his being a big spender or of raising taxes or of wanting to control health care – those accusations are true. But the cause isn’t just that he is populist and a caring guy. It’s also because of the irresponsible behavior of his predecessors and the lobbying of the health care industry.

The only alternative is … there is no alternative.