Red Ink

Iraq distracts from the real American blood letting

by Bryan Zepp Jamieson

07/20/03

http://www.zeppscommentaries.com/Politics/redink.htm

The spin machine has been assuring one and all that a few "temporary" (that’s the word they’re using) deficits won’t do the economy any harm To this end, they’ve been plying the airwaves and captive newspapers with assurances that, vast as the projected federal deficits are, they aren’t as big, in comparison with the GDP, as Reagan’s were after his disastrous tax policies blew up in his bemused face.

The claims even contain some truth, which is a departure from most GOP propaganda of late. In terms of the percentage of GDP, Reagan’s vast debts were actually bigger -- if only slightly -- than what the White House claims America faces today. Of course, the spin machine forgets to mention that government spending has already been cut to the bone this time, and there is an existing mountain of debt far larger in both the private and public sector than last time. Even so, Reagan’s advisors quickly realized that "trickle down" was an unalloyed disaster and raised taxes – shifting the burden downward, of course.

But there’s a lot less wriggle room this time. Congress won’t raise taxes, whether the country lives or dies. The economy is much less structurally sound than it was in 1983, and the Fed doesn’t have the luxury of significantly lowering interest rates in order to minimize the impact of lowering the debt. Nor is there the comforting notion that inflation will erode much of the debt. While it’s true that a trillion just doesn’t buy what it did twenty years ago, the fact is we are worried about deflation.

We’re also looking at a trade war. Globalization is another cheap labor ploy to the Republicans. They have no more interest in real free trade than they do in a balanced budget. (Yes, these are the same Republicans who tried to ram though a balanced budget amendment just 7 years ago -- back then, they could blame Democrats for spending.) That weak dollar that Putsch is unexpectedly pushing amounts to an informal tariff, since a cheap dollar is a plus in trade. Simultaneously, he had fought to impose illegal tariffs on some of his biggest trading partners, including Canada and the EU. The US just got hit with an immense fine for the illegal tariffs George imposed to protect the domestic steel industry.

The worst thing is that the projected deficits – $455 billion this year, $475 billion next year, and $1.9 trillion over the next five years – are the rosy-hued Office of Management and Budget claims. The OMB in Republican White Houses tends to be a joke. They were famous for understating deficits by 40, 50, 60%. The Congressional Budget Office in those years was more accurate, but we don’t have that any more, since the House Republicans, putting ideology ahead of common sense, decreed that CBO must factor in expected surges in the economy caused by the tax cuts.

How’s that doing so far? Well, with eight months gone in this fiscal year, and with the first set of tax cuts firmly in place, revenues are down six percent, as opposed to the increase of 3% that the dynamic scoring accounting scam said would occur.

Toss in a 10% increase in spending, and you begin to see how a $120 billion surplus could turn into a $455 billion deficit in just three years. The poor Republicans can’t even blame Democrats for the increased spending, try as they might. Not only have they controlled the House and Senate for the past three years, but they’ve controlled it with an iron fist, frequently running roughshod over debate and deliberation and simply muscling spending bills through based on their slim majorities. They are even using threats and intimidation to get their way.

It’s a bit late to try and blame the Democrats for the deficits, so the spin is that the deficits don’t matter. Each trillion dollars in debt requires about $70 billion each year to finance the debt; that’s $70 billion that is just pissed away, tax dollars that don’t benefit working tax payers.

The deficits don’t even include the money being spent on the occupation of Iraq. Rumsfeld says it’s costing about $4 billion a month now, and of course, with a guerrilla war taking shape, more troops and money will be required.

Another spin the Republicans are trying is a variation on the "but Clinton" strategy. The argument goes something like this: When you take away the surplus funding going into social security, the actual balance in the year of the so-called $120 billion surplus was actually still a deficit of about $45 billion. Which is fine, so far as it goes, but it ignores the fact that the same situation exists now, and so they carefully fail to mention that if you don’t include SS receipts, the annual deficit has grown from $45 billion to $615 billion!

But I don’t guess the Republicans are going to want to mention that one.

But that doesn’t mean their problem is going away. The deficits are going to be even worse than what the OMB is saying. I expect to see $500 billion this year, $800 billion next year. Those are horrific numbers. America is bleeding to death.

Trickle down economics didn’t work in the 80s, and it won’t now. The latest Putsch lie is that the tax cuts will create jobs. Since the first round of tax cuts, unemployment has gone to half again what it was. Don’t hold your breath expecting anything better from the second round.

To give you some idea, cheap labor economics have had the following effects: while revenues have dropped 6%, corporate taxes have dropped nearly 15%. While the economy has lost 2.3 million jobs, it’s actually gained service jobs ("Mcjobs"), and lost 3 million manufacturing jobs. Despite the weak dollar, our trade deficit is averaging more per month than it did per year under Reagan. The corporations want cheap labor, and they want a strong consumer base, and they can’t seem to figure out you need well-paid labor to have a strong consumer base. People with McJobs can’t afford new cars, or refrigerators, or any other big ticket item. And consumer debt is already at horrific levels. A medium-size depression now could cause economic collapse in America.

The voters are noticing. Over 80% of those polled regard the economy as the most important problem, and 70% disapprove of how Putsch is handling it. Over half (55%) oppose the tax cuts and want them rescinded.

So Putsch tries to keep us focused on Iraq, and the war on terrorism, often trying to conflate the two.

Only those aren’t going well, either.

It would be interesting to have a pollster ask people if they think George will stage a 9/11 type disaster in order to distract from his failing policies. I suspect the numbers would be disturbingly high.

Of course, for the rest of us, the damage is done.