The prospect of a $9 trillion debt over then next 10 years sounds horrible. But fortunately it is not really as bad as it seems as Paul Krugman makes clear today.
There are two main reasons for the surge in red ink. First, the recession has led both to a sharp drop in tax receipts and to increased spending on unemployment insurance and other safety-net programs. Second, there have been large outlays on financial rescues. These are counted as part of the deficit, although the government is acquiring assets in the process and will eventually get at least part of its money back.
What this tells us is that right now it’s good to run a deficit. Consider what would have happened if the U.S. government and its counterparts around the world had tried to balance their budgets as they did in the early 1930s. It’s a scary thought. If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression.
As I said, deficits saved the world.
With Ted Kennedy’s passing
it will become imperative for Democrats to pass health insurance reform in his memory. Republican obstinance and abuse of the filibuster procedure will necessitate that at least part of the bill be passed through the reconciliation process.
Republicans fought for six months to keep Al Franken from taking his rightful place in the Senate. Now they will have another six months during which Democrats will be one vote short of what is needed to break their never-ending filibusters. It will take that long before a special election can be held to fill Kennedy’s seat. State Democratic lawmakers in Massachussetts shot themselves in the foot by passing a short-sighted law a while back to deny then-Gov. Mitt Romney the power to appoint a temporary replacement. Their display of partisan spitefulness will now cost Democrats an important vote for the rest of the year.
Who is the craziest member of the U.S. Senate?Tom CoburnJim DeMint Jim Bunning Jim Inhofe
From Paul Krugman:
Let’s talk for a moment about why the age of Reagan should be over.
First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.
To be sure, the wealthy benefited enormously: the real incomes of the top .01 percent of Americans rose sevenfold between 1980 and 2007. But the real income of the median family rose only 22 percent, less than a third its growth over the previous 27 years.
Moreover, most of whatever gains ordinary Americans achieved came during the Clinton years. President George W. Bush, who had the distinction of being the first Reaganite president to also have a fully Republican Congress, also had the distinction of presiding over the first administration since Herbert Hoover in which the typical family failed to see any significant income gains.
And then there’s the small matter of the worst recession since the 1930s.
There’s a lot to be said about the financial disaster of the last two years, but the short version is simple: politicians in the thrall of Reaganite ideology dismantled the New Deal regulations that had prevented banking crises for half a century, believing that financial markets could take care of themselves. The effect was to make the financial system vulnerable to a 1930s-style crisis — and the crisis came.
“We have always known that heedless self-interest was bad morals,” said Franklin Delano Roosevelt in 1937. “We know now that it is bad economics.” And last year we learned that lesson all over again.
And yet, as Krugman goes on to note with some dismay, so many people have refused to learn that lesson. They continue to harbor this Reaganite disdain for anything associated with the government and are unwilling to acknowledge that many government programs have worked very well over the years. And worse, they insist on continuing to vote for Republicans for public office! Please stop the insanity!
Did anyone think that getting healthcare reform done was going to be easy?
Yes, I know that Obama came into office with huge approval ratings - especially when compared with the dismally low approval ratings of his immediate predecessor. I know that Democrats have large majorities in the House and Senate. And still we read everyday stories like this one from Salon
that practically write the obituary for meaningful healthcare reform.
Liberal pessimism seems to be peaking right at the moment when we need to come together and make the final push on behalf of this vitally important legislation. The Democrats’ big majorities are actually not as big as they seem because of the Republicans’ extreme obstinance and their continued abuse of the filibuster in the Senate. Remember that the Democrats’ “filibuster-proof” 60 votes in the Senate only works if you are counting that backstabbing little weasel Joe Lieberman and a healthy Ted Kennedy. And that is not even mentioning the concessions that would be needed to keep Blue Dogs like Ben Nelson, Kent Conrad and Blanche Lincoln on board.
But if we could get a straigh up-or-down vote it would be a snap to pass health reform. Thus we need to use the reconcilliation process that bypasses Senate rules and gets it done.
The whole big fight up until now has been to see whether or not Democrats will have to go that route. If enough Republicans could be coaxed to cross over - Olympia Snowe, Susan Collins, Dick Lugar, and so forth - to make up for Lieberman/Nelson/Kennedy, then all would be good.
But if not, then we will have to go forward with the alternative plan - which now appears to be likely -- Is The White House Ready To Ditch Republicans And Turn to Reconciliation?
But in the meantime, we’ve had all this handwringing from Liberals and Democrats bemoaning a Clinton-era loss that will lead to another 12 years of banishment to the political wilderness for the Party. Nonsense! Get a grip, people! Step back, take a deep breath and recognize that the administration could not just plow ahead with reconciliation without first giving the bipartisan approach a try. We needed the Republicans to demonstrate their obstinance before deciding to go the reconciliation route. Otherwise, the reform opponents would have used it to scare people into thinking that a secret plan was being pushed through without adequate review.
Things are not as bad as they seem. It was never going to be easy to get a good reform package passed. There is very little upside in it for Obama or for Democrats. Providing health coverage to a bunch of poor people who still won’t turn out to vote while upsetting lots of well-off people who always do vote is not the smartest thing to do politically. But it was the right thing to do morally and in the long-run it will make our country a better place to live and raise our families.