Opinions of a Wandering Waif

thescrambler:

Via the Business Insider:

President Obama’s administration has been blamed for reckless spending that has put America into its debt hole. But in reality, much of that spending emanates from policies of President Bush, according to the Center on Budget and Policy Priorities.

They argue that Iraq, Afghanistan, and the Bush tax cuts (along with the economic downturn) are what is driving the U.S. deficit, not stimulus spending. 

The chart presents the ugly truth.

Put that in your teapot and steep it.  =D ~ waif

Today’s most important economic news: U.S. household debt fell for the seventh straight quarter in the first three months of 2010 as Americans continued to respond to the recession’s fallout.

But like all economic news, its significance depends on where you’re standing — whether you’re a…

Are we finally in a recovery? Who’s “we,” kemosabe? Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better. As to the rest of us – small businesses along Main Streets, and middle and lower-income Americans – forget it.

The Volcker rule’s loopholes (via ryking)

RT @ezraklein http://tinyurl.com/ycrb2ws

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“Our health-care problem is our deficit problem,” Obama said in September. “Nothing else even comes close.” He’s right. The Center on Budget and Policy Priorities made the point clearly in a recent report on the budget outlook. The whole game, they wrote, is Social Security, Medicare and Medicaid. “Growth in those programs accounts for all of the increase in federal spending as a share of GDP over the next 40 years,” they said. Total spending for everything else, from agriculture to education to missile technology, is predicted to grow more slowly than the economy.

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.

The story on the stimulus is similarly depressing. At its base, the stimulus is Keynesian economics in practice. A recession hits, and individuals and businesses become scared that they’re next on the chopping block, so they stop spending and start saving to protect themselves from the hard times to come. That drains demand from the economy, and without demand, the hard times get even harder. Government is the only player able to disrupt this vicious cycle. By sharply increasing its spending, it can generate demand, improving the economy until individuals and businesses are comfortable reentering the marketplace.

Key to this whole theory is that the government should act “counter-cyclically”: In good times, it should save and store, and in bad times, it should spend and borrow. The exact opposite holds true for businesses and individuals, which makes the whole project pretty unintuitive.

Students in macroeconomics classes learn all this in the first week of September. After a year of trying to explain it to an economically distressed nation, however, Obama basically gave up. Instead, he bowed before the entrenched, incorrect, conventional wisdom. “Families across the country are tightening their belts and making tough decisions,” he said. “The federal government should do the same.”

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What Didn’t Happen

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It’s instructive to compare Mr. Obama’s rhetorical stance on the economy with that of Ronald Reagan. It’s often forgotten now, but unemployment actually soared after Reagan’s 1981 tax cut. Reagan, however, had a ready answer for critics: everything going wrong was the result of the failed policies of the past. In effect, Reagan spent his first few years in office continuing to run against Jimmy Carter.

Mr. Obama could have done the same — with, I’d argue, considerably more justice. He could have pointed out, repeatedly, that the continuing troubles of America’s economy are the result of a financial crisis that developed under the Bush administration, and was at least in part the result of the Bush administration’s refusal to regulate the banks.

But he didn’t. Maybe he still dreams of bridging the partisan divide; maybe he fears the ire of pundits who consider blaming your predecessor for current problems uncouth — if you’re a Democrat. (It’s O.K. if you’re a Republican.) Whatever the reason, Mr. Obama has allowed the public to forget, with remarkable speed, that the economy’s troubles didn’t start on his watch.

So where do complaints of an excessively broad agenda fit into all this? Could the administration have made a midcourse correction on economic policy if it hadn’t been fighting battles on health care? Probably not. One key argument of those pushing for a bigger stimulus plan was that there would be no second chance: if unemployment remained high, they warned, people would conclude that stimulus doesn’t work rather than that we needed a bigger dose. And so it has proved.

It’s important to remember, also, how important health care reform is to the Democratic base. Some activists have been left disillusioned by the compromises made to get legislation through the Senate — but they would have been even more disillusioned if Democrats had simply punted on the issue.

And politics should be about more than winning elections. Even if health care reform loses Democrats’ votes (which is questionable), it’s the right thing to do.

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