Debt Crisis Local and National

Tom Sgouros explains it…

Let’s be real, after the Clinton surplus, we have a deficit because George W. Bush chose to prosecute two wars without paying for them, allowing our soldiers and their families to be the only ones to sacrifice for war. He also proposed and saw passed a Medicare drug benefit that predominantly benefited drug companies, and cut taxes by a tremendous amount long after it was clear that the other policies were going to cause the annual deficit to balloon. He squandered that surplus with the able assistance of a Republican-controlled House and Senate. He did it with the help of some Democrats, of course, but they weren’t in control of any branch of the government.

Sgouros doesn’t let RI off the hook either, or our politicians. If you want to know why RI is worse off than MA, read the rest here.

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10 responses

  1. Donald Wolberg | Reply

    There is reality and there is delusion. The slump at the end of the Bush2 era was driven by housing nonsense promulgated by Democrat rules and regs. The wars cost, of course, but it was the supposed right of anyone to get a house fnanced whether they could pay for it or not, not led to the bank disaster, coupled with the creation of very odd financial instruments. The Obama non-policies have tripled the Bush debt, failed in job creation with 9.1 or 9.2% measured unemployment and perhaps 15% actual unemployment–folks who are not measured because they stopped looking. The federal government takes in about $2.6 trillion each year (that is 2,600 billion–hardly broke!) and spends about $3.8 trillion. The Obama folks ahve accumulated more debt in less than three years than all the administrations combined.

  2. Tom is always a breath of fresh air in a media so dominated bt right-wing thinking about blaming unions ansd workers for all our problems.

    Right-wing natinal talk radio opely says that if the Democrats don’t surrender and gut medicare and social security, they woud prefer to crash the economy by a default to brng Obama down. They are not merely wrong, they are truly evil. And there seem to be no adults in the Republican party to stand up to this and act sensibly. I say this as a former Republican local candidate, disgusted by Democrat corruption in my town (No. Prov) and the who-you-know-old-boy Democratic network. But what ever happened to the good government party of Nelson Rockefeller, John Chafee, Ron Machtley, Claudine Schneider etc? Hijacked by out of control corporate greed and their lackeys. As I said before, they are ruinng the country.

    1. Those Republicans could never get elected now.

  3. Donald Wolberg | Reply

    Hmmm; the Afghan war is blamed; the Iraq war is blamed; we ignore or forget the Libyan war, the Yemen war, the new Somali war. Unions” Hmmm…Boeing want to hire 2000 people in South Carolina. The “democratic” union bosses want that stopped. South Carolina apparently does not deserve jobs, only unionized Boeing plants should have jobs. 51% of Americans pay no taxes at all and 5% pay 65% of all taxes—democracy in action? If all Americans making $1 million dollars or more a year were taxed 100%, and all their income taken, I recall reading that 10% of the national debt for one year would be paid. When was the last 9.2 % of Americans are unemployed and we all know that number is much, much higher–who owns unemployment if not the current administration. Out here in America away from either coast, and in the midst of failed policy after failed policy. it is very doubtful if Mr. Obama has much of a chance at re-election.

    1. I hope you’re right-four more years of this strutting fool,and the country will be done for.It may already be.

  4. It seems that some of us were asleep during the Bush II years.

    About half of the current deficit is directly attributable to the Bush II tax cuts. Here’s a pretty picture to illustrate:

    http://www.washingtonmonthly.com/political-animal/2011_05/the_drivers_of_our_debt029621.php

    Another 20% is due to the economic downturn, which was pretty caused by the massive DE-regulation that occurred mainly under Bush II. They systematically dismantled most of the regulations that were put in place to rprevent another Depression. Once these safety measures were removed, we got another major economic crisis, just like in 1929. Funny how that worked, isn’t it?

    As for the tired lie that Dem regs caused the collapse, that is absolute garbage. The CRA was passed in in the late 70s; what, a 30-year lead time? Please. Plus, the real culprits in the housing bubble were the ‘shadow banks’ like Countrywide Finance, and they were not covered by the CRA, so they were under NO obligation to make loans to lower-income people.

    Look–if I walk into a bank, there are three ways I can come out with money. 1) I deposited the money in the first place; 2) the bank agrees to loan me money; 3) I have a gun.

    For the loans in question, we can rule out #s 1 & 2.. That means that Countrywide made a choice to loan the money. Why? Because they could turn around and sell it, w/o retaining any stake in the loan. IOW, they didn’t care if the loan was ever repaid, so why bother with underwriting practices? This is flagrant moral hazard, made entirely possible by the DE-regulations put through by Bush II and his rubber-stamp congress.

    And no, Fannie and Freddie were not to blame. They did not enter the sub-prime market in any significant way until 2006. And they did so because the Republican congress (remember–the GOP controlled the entire gov’t for almost 6 years) put pressure on Fannie & Freddie to facilitate home ownership, so that Bush II could brag about how he had increased the percentage of Americans that owned their own homes.

    This is the reality of the situation. Stop the lies already. Just because Fox News says it, don’t make it so.

    As for the “strutting fool.” I assume you’re referring to either Boehner, Eric Cantor, Paul Ryan, or Mitch McConnell. These are the guys who say something, then say exactly the opposite two weeks later. These are the guys who ran up the deficit, w/o ever stopping to consider how anyone was going to pay for it, but suddenly became very concerned ONLY when a Dem entered the White House. Paul Ryan’s proposed budget would add trillions to the deficit, and require that the debt ceiling be raised. And he’s a fiscal conservative?

    And, BTW, pretty much the entire health care bill is com,prised of ideas that were originally proposed by Republicans. The hated individual mandate? That came from Bob Dole.

    1. Unlike you,when I don’t know enough about a subject to make an intelligent comment,I don’t.
      I dislike Obama for reasons having little to do with the current depression,but for his ultra social liberal stances and his lack of having ever acomplished anything specific in his very cossetted life.
      Yes,his father ran out on him.
      His stepfather apparently didn’t and he got schooled in a country with little similarity to the USA.
      His passage through law school was interesting-he was editor of the law journal,but was non-productive(I always wanted to use that term for something other than a cough).
      His law practice was meager,mainly consisting of representing
      community groups.
      “Community organizer”is code for a hustler who dos the smoke and mirrors thing.
      There are a few who actually accomplish anything.
      He got a Nobel Prize as a signing bonus to use a sports analogy.
      I’m not in thrall to the Tea Party-I think Rand Paul is nuts and Michelle Bachmann and her frankly CREEPY husband are hypocrites with their snouts deep in the public trough which they so pretend to dislike.
      I wonder why the Tea Party didn’t try to reinstate the consumer credit interest tax deduction so working and middle class people could have a “loophole”of their own.
      Or bring back the $1000 adjustment to income on real estate tax for those filing the 1040A since property taxes are rising everywhere.
      I don’t mind closing loopholes for corporations and such extremely rich individuals like hedge fund managers,insurance executives,or lawyers-it’s not like they create many jobs.
      Obama’s love for social engineering is what angers me the most.
      I’m a;; for saving Medicare,Medicaid,and Social Security.
      I don’t want some Ivy league A-hole telling me what kind of bulbs to use,or what to eat,or what to drive,or what kind of

      firearm I can own,or how to raise my kids.I don’t want 1st graders trying to understand same sex marriage either.That’s appropriate when children are approaching high school.
      I’m a fiscal moderate and a social conservative except I don’t give a damn about same sex mariage or any consensul sex between adults.Or medical marijuana.
      I do want voter ID and strict enforcement of immigration laws and no amnesty whatever-it doesn’t work-I know from the inside and I doubt you do.
      I don’t want to change the concept of birthright citizenship however.That can be dealt with using a civil statute that eliminates the conferral of any benefit for the parents if they are not here legally.
      I really don’t know about the housing bubble,but the companies you mentioned did engage in unethical practices.
      Finally,Obama makes me want to throw up on a personal level.
      That’s just purely an emotional reaction that I won’t apologize for.

  5. I didn’t mention Obama’s bizarre approach to foreign policy-It would take up too mich space.
    Health care-ditto-I have a mixed opinion about health care reform which would tke awhile to explain;
    I definitely want to keep the restrictions on insurance companies,but am troubled by the mandatory purchase provision.
    have a nice night.

  6. I don’t think there’s much dispute about the underlying facts that are driving the economy into the ditch. Increase of government spending as part of the GDP is more the result of a contraction of the denominator than it is an expansion of the numerator. Put another way, the overall economy has contracted at a greater rate than the expansion of government spending. In essence, the argument that government spending has increased as a percentage of GDP is a false, or at least an incomplete, argument.

    Just like the recession being over is a false assertion. We know through studies released recently through Northeastern University that wage and salaries over the last 18 months of “recovery” contributed only 1% to the growth of GDP. On the other hand, corporate profits over the same period contributed to 88% to the growth of GDP. (Shameless plug – see my column in this week’s Cranston Herald for more on this.) The point here is that if our policy makers are waiting for consumer spending to grow us out of the economic doldrums, under current conditions, they’ll be waiting a very long time.

    I give both examples to point out how both republicans (GDP) and democrats (recovery) in the current political “debate” bend facts to suit their agendas and alter the facts to suit a thirty second sound bite on the 24/7 cable news cycle.

    We can argue whether it’s Obama’s spending or Bush II’s ineptitude that has brought us to the brink. But when we do this, let’s not forget President Bubba, during whose administration the SEC was essentially deregulated and Glass-Steagall, with the aid of a compliant Congress, was repealed. This deregulation allowed Freddie to engage in moral hazard on a grand scale. Goldman, Bear, Lehman, and all the rest were allowed to behave as Dodge City gunslingers rather than serious and responsible investment banks.

    As much as some would like to believe, the CRA was not the cause of the banking crisis as it seemed to have worked fine for about 30 years. It is true that many lenders issued NINJA mortgages, but the real question isn’t what they did; rather it’s why they did it? The answer is exquisitely simple – because they could.

    One thing that “free” marketers love to ignore was Adam Smith’s admonition in Wealth of Nations. Long ignored by the Chicago School of Economics and its acolytes is Smith’s admission (at least on page 209 of my copy) that government has a role in the economy, at least as referee (my word, not Smith’s). He knew that if allowed to, people in the marketplace would behave irresponsibly, inhibiting an economic actor’s ability to act in his own self interests, affecting the magic of the invisible hand. Thus began the amnesia that led to the government’s ceding of its referee duties during the second term of Bubba’s presidency, setting motion the events of the past decade.

    That’s not to say that Bubba deserves all blame. Clearly, Bush II’s policies starting with those horrible tax cuts (“it’s the people’s money” forgetting that it was also the people’s debt) that took about a $2 trillion surplus and turned it into a $5 trillion deficit was not the finest hour in economic policy – especially if one takes the position that the debt is of critical economic importance as some posers today seem to suggest.

    Add to that two wars (another trillion or so) a Medicaid perscription financial sink hole, along with a variety of mis-steps and you have to paraphrase the late Senator Everrett Dirksen and say “a trillion here and a trillion there and pretty soon you’re talking about real money.”

    We’re talking real money now.

    That isn’t to say that we shouldn’t be talking about the debt – we should. But as I wrote four weeks ago (another shameless plug for my column in the Herald), tying macro/micro economic, social, entitlement, and tax policies into a debt limit increase that 102 times prior was considered a pro forma act could only result in bad policy. The only question I had was how bad it would be? We’re finding out.

    Which leads me to my final thought. At the heart of all of this is government’s ability to tackle large problems. Earlier this year, and before those Rachel Maddow commercials on MSNBC, I had the opportunity to visit the Hoover Dam. I remember thinking how almost impossible it would be to enact a far-reaching public works project in the current political climate and how important those projects are to the well-being of the economy and the people.

    That goes to the issue of political leadership. As we stand at the precipice of a future most of us could never imagine, I think about our “leaders” in both the executive and legislative branches and I’m reminded of a story about Winston Churchill. When, after the conclusion of WW II his party lost to the Labour Party and he was to be succeeded by Clement Attlee, Churchill was asked what he thought of his successor. Churchill replied, “There’s a lot less there than meets the eye.”

    I finally understand what he means.

  7. Much as I don’t care for Rachel Maddow’s “cleverer than you by half” demeanor,those ads say something.
    I have always had an interest in electric transit and railroads and we built an amazing network with the “old”technology,and we did it fast.
    Today,a 20 mile “light rail”system costs billions,takes a decade or more,and then doesn’t work well.
    The PWA/WPA public works are still rockin’.
    Neat architecture too,not the Leggo-wannabe stuff of today.
    I could go on here,but you get the point.
    Newer isn’t always better.
    There are still PCC trolleys built in the 40′s running every day in Philly and Beantown as an example.

    BTW I totally agree with your points made above.
    When we get wizened our noses look bigger-same with the GDP and spending.

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