What caused the deficit?

It has become an article of faith among Republicans that President Obama's polices caused the deficit to soar. As a result, they claim we need to cut federal programs that assist low and middle income families because it is immoral to leave these bills to our children. The problem is that it is just not true that the Recovery Act is responsible for the nation's projected deficits. According to the non-partisan Congressional Budget Office, the Recovery Act and even TARP (the bank bail-out) are not responsible for projected deficits. That is because these policies are short term. It's long term policies, like the high income Bush tax cuts, that stay in the system and remain unpaid for, that drive deficits. The Great Recession played a major role by reducing tax revenues and triggering automatic stabilizers, existing counter cyclical laws, like unemployment compensation and food stamps, that automatically increase federal spending during a downturn and then decrease spending during a recovery. Check out the chart by the Center on Budget and Policy Priorities (CBPP) that illustrates that absent the Bush era tax cuts, the wars of choice in Iraq and Afghanistan and the downturn, there would be virtually no deficit.     The entire CBPP report is linked here.

Earmark ban costs Burnett County, Wisconsin

Federal earmarks represent less than half  of 1% of the federal budget.

Compared to  the trillion dollar (and counting) wars in Iraq and Afghanistan, the $1.6 trillion Bush era high income tax cuts, the $500 billion prescription drug bill, and the recession, earmarks have played virtually no role in creating the deficit.

Yet Republicans have made earmarks a national issue. The House of Representatives has banned them as has President Obama.

Now local communities, like Burnett County, Wisconsin, that used these federal dollars to fund socially necessary local projects are having second thoughts. Local governmental leaders from both political parties have realized that the moratorium on earmarks will force them to eliminate valuable and necessary projects or raise property taxes to pay for them.

Just a few weeks ago, Republicans in the House of Representatives insisted that the Bush era tax cuts be extended for those making over $250,000 annually. This will cost $81.5 billion over two years and Burnett County the modern communications system that it sorely needs and cannot afford..

The New York Times article on how local officials are rethinking the ban on earmarks is linked here.

Republicans demand assistance for the rich; slam door on the unemployed

All indications are that the Obama administration will cave into Republican demands to extend the Bush era tax cuts for the rich, people making over $250,000 a year.

Not only only will this increase the deficit by $700 billion over the next decade, but it will do virtually nothing to promote economic growth since there is no evidence that high income tax cuts result in economic growth.

At the same time, the Republicans stopped Congress from extending unemployment benefits to 2 million Americans who have been unemployed for more than 26 weeks.

Not only is it cruel to deny financial support to American families who have lost their jobs, but it hurts the economy since unemployment benefits are a very effective form of promoting economic growth since the unemployed spend virtually every dollar they receive.

Rather than stand up for the nation's unemployed and for fiscal responsibility, President Obama has announced that he will freeze the pay of federal employees for two years. These public servants earn less than their private sector counterparts. More importantly freezing their pay has virtually no impact on the deficit since employee compensation is a very small component of federal expenditures. And it will actually weaken the economy since it will reduce spending at a time when the lack of demand threatens the very weak recovery.

In a little noticed blog a few weeks ago David Leonhardt, the New York Times economics reporter, asked: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

Those tax cuts passed in 2001 amid big promises about what they would do for the economy.

What followed?

The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7. (See chart above that is adjusted for inflation)

The competition for slowest growth is not even close, either. Growth from 2001 to 2007 averaged 2.39 percent a year (and growth from 2001 through the third quarter of 2010 averaged 1.66 percent). The decade with the second-worst showing for growth was 1971 to 1980 — the dreaded 1970s — but it still had 3.21 percent average growth.

The picture does not change if you instead look at five-year periods. Here’s a chart ranking five-year periods over the past 50 years, in descending order of average annual growth:

I mean this as a serious question, not a rhetorical one: Given this history, why should we believe that the Bush tax cuts were pro-growth?

Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.

Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.

The theory for why tax cuts should create growth and jobs is a strong one. When people are allowed to keep more of each dollar they earn, they are likely to work longer and harder. The uncertainty is the magnitude of this effect. With everything else that’s happening in a $15 trillion economy, how large of an effect on growth do tax cuts have?

Every available piece of evidence seems to suggest that the Bush tax cuts did little to lift growth. I have yet to hear a good argument to the contrary, but I’d be fascinated to see another blogger or an economist take a crack at it.

While no one has stepped up to answer Leonhardt's challenge, the Republican demand that the richest Americans be given a budget busting tax break has become a virtual certainty.

Republicans propose to borrow money from the Chinese to give to the richest Americans!

House minority leader, Representative John Boehner, who fought against extending unemployment benefits to America’s unemployed workers wants to make the $1.7 trillion Bush tax cuts, 50% of which went to the richest 1%, permanent.

President Obama has proposed keeping the tax cuts for 95% of Americans, but allowing the tax breaks for those making over $250,000 to lapse, returning to the rates of the Clinton era. The 1990's top marginal tax rates were slightly less than one third the rates of the high growth 1950s and roughly 40% of the rate in the '60s and '70s when the economy grew at much faster rates than it has since the nation embraced supply side ideology in 1981.

Boehner, employs the same rationale used by President Bush to win approval of the cuts in 2001 and 2003, arguing that extending the tax breaks to high income earners is necessary to revive the economy.

The result of the Bush era tax cuts: the weakest period of economic growth and job creation since the Great Depression, culminating in the real estate bubble and the Great Recession.

A New Jersey Star Ledger editorial entitled “On tax policy Republicans have lost their way” notes:

Extending these tax cuts would force the treasury to borrow an additional $700 billion over the next decade. What Republicans are suggesting is this: Let’s borrow money from the Chinese and hand it over to the Americans who need it least. More than half of the money would go to those earning at least $2 million a year.”

We’ve been down this road before and it did not work. Fool me once, shame on you; Fool me twice, shame on me.

The entire editorial is linked.

The Journal Sentinel's latest man bites dog story

In the Milwaukee Journal Sentinel's latest man bites dog story Katelyn Ferral writes:

More than 65% of Midwest chief financial officers and senior comptrollers said cutting corporate and personal income taxes is the best way to create jobs, according to a national survey conducted by Grant Thornton this month.

Thirty-five percent of those polled said cutting personal income taxes would be most effective in creating employment opportunities, while 32% said cutting corporate tax rates would best allow companies to hire.

What will the MJS tell us next, that alcoholics prefer beer to sparkling water?

Economic policy, including tax policy, should be based on facts not opinions, even those of highly paid CFOs.

The United States enacted the largest tax cut in its history in 2001 ($1.3 trillion) and followed that up with additional capital gains and dividend tax cuts in 2003.

The total value of the 2001-2003 tax cuts was $1.8 trillion.

More than 50% of the $1.8 trillion tax cuts went to the richest 1%, CEOs and CFOs included who averaged over $900,000 annually.

The result-the weakest job creation of any post World War II business cycle.

If cutting top marginal income rates led to job creation we should have had a job boom. Instead we had the opposite. And a large proportion of the private sector jobs that were created (finance, real estate and construction) were the result of the housing bubble. Once that burst all of those jobs were eliminated.

We experienced much greater job growth during every other post WWII business cycles, including those in the 50s, 60s, 70s and 90s, when the top marginal tax rate was significantly higher than it was during the 2001-2007 business cycle.

High income personal income tax cuts, such as the 2001 tax cuts or those advocated by the CFOs, are weak economic engines because high income earners are less likely to spend their additional income than less affluent people.

Wisconsin's unemployed need jobs

If you lost your job last year, you're not alone. There are now 15.3 million Americans who are officially unemployed, up from 7.5 million in December 2007. A record 40% have been unemployed for more than six months.

Wisconsin's unemployment rate surged to 8.7% in December from 8.2% in November.

The state lost a total of 163,000 jobs in 2009, more than 26,000 in December alone.

The four-county metro Milwaukee area has been particularly hard hit losing 48,200 jobs (5.7% of total employment), the third-deepest percentage loss in the nation. Only Las Vegas, where employment levels fell 7.4% and Detroit, which fell 6.2%, lost a greater percentage of their jobs .

The employment picture is even worse than the official data suggests.

In the past year 82,840 workers dropped out of the Wisconsin labor market, 13,400 in December alone.

If discouraged workers are counted, Wisconsin's unemployment rate jumps to 11.4%. And if you include people who are working part-time only because they cannot find full-time employment the rate jumps 13.2%.

Wisconsin's working people are hurting. Job loss is undermining families and communities across the state.

Bankruptcies have soared, 30% last year, following a 35% increase the year before contributing to a record number foreclosure filings as job cuts make it difficult for homeowners to keep up with their monthly mortgage payments.

Preliminary figures show there were 30,624 foreclosure filings in the state last year, up almost 20% from a record 25,541 in 2008, Madison-based ForeclosureAlarm.com, which tracks foreclosures through court documents, reported. Milwaukee leads the way with more than 5,800 foreclosure filings.

The Wisconsin Senate Republican response to these alarming numbers is to propose more of the very same policies-reducing regulations and taxes - that caused the Great Recession.

Their press release says nothing they haven't said for the past thirty years. No matter what ails the economy and despite all the evidence, including massive job loss and declining real wages, Wisconsin's Republican leadership prescribes the same failed medicine.

Their tax cut proposals, like eliminating capital gains, corporate taxes and combined reporting, are the least effective form of economic stimulus. Upper income, capital gains and dividend tax cuts were the centerpiece of the Bush administration's economic agenda. The result-anemic growth, no net job creation, the most unequal distribution of income since 1929 and soaring deficits.

Republican insistence that tax cuts be one third of the $787 billion stimulus package and President Obama's acquiescence significantly undermined its effectiveness according to a recent Congressional Research Service (CRS) report .

The report notes that the February 2009 economic stimulus package included $286 billion in tax cuts, many directed towards business. It concludes that "the evidence ... suggests that a business tax subsidy may not necessarily be the best choice for fiscal stimulus" because "product demand appears to be the primary determinant of hiring."

When firms are saddled with excess capacity which is currently a low 72%, investment tax credits will not stimulate investment.

Businesses and their advocacy organizations like the MMAC and WMC will always seek taxpayer subsidies, and apparently the Wisconsin's Republican Party will always help them, because profit margins increase when taxes are reduced. But these taxpayer funded subsidies do not create jobs.

Unfortunately, the state's Democratic leadership hasn't offered much help to the Wisconsin's workers either. It recently passed legislation that includes a post secondary education tax credit for businesses, higher annual limits on angel investment tax credits and other provisions, but nothing that will help put the Wisconsin's 251,000 unemployed workers back to work.

The Obama administration's failure to enact a stimulus package large enough and targeted to create jobs led to the Democrats stunning defeat in Massachusetts.

Wisconsin workers need work. Is anybody listening?

Republicans play politics while economy deteriorates

Paul Krugman, a Nobel Prize winning economist not noted for hyperbole, writes:

A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.

It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.

Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again...

It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.

If you want the economics behind this assessment read Krugman's entire op ed.

Walker sacrifices Milwaukee on the altar of a failed ideology

Milwaukee County Executive Scott Walker's decision to reject federal economic stimulus dollars reflects a zealous commitment to the very market extremist ideology and Republican orthodoxy that has helped create the current economic crisis.

As several commentators ranging from Gretchen Schuld, Bill Christofferson, and Rob Henken to the Milwaukee Journal Sentinel editorial board have noted Walker's position sticks it to Milwaukee County which has significant infrastructure investment needs including: $10 to $15 million for the Milwaukee Public Museum; $5.5 to $8.5 million for the Milwaukee County Zoo (plus another $130 million for capital improvements); $276.6 million for the Milwaukee County Parks; and $56 million for 150 new buses and $15 million annually to operate the collapsing county transit system.

And what about the community's growing number of unemployed workers. Milwaukee has lost 6,000 jobs this year. Black male unemployment is the second highest in the nation. The city's official unemployment rate stands at 7.7%. The real rate including those who have dropped out of the labor market and those working involuntarily part-time is almost 13%. We have the 7th highest poverty rate in the nation. Yet, Walker intends to turn down proposed federal investments in the community that will help repair the failing infrastructure and create jobs.

The investments that Walker opposes are effective job creators, much more effective than the tax cuts than Walker says he would consider supporting.

I have attached a chart based on data complied by Mark Zandi, a former economic advisor to Senator John McCain, that show that tax cuts are an ineffective form of stimulus compared to alternatives such as extending unemployment benefits, increasing food stamp allocations or investing in the infrastructure.

We've been down the Walker tax cut road before and it leads to nowhere.

A year ago, as layoffs increased and output declined, it was clear that monetary policy, the manipulation of the money supply to promote economic growth with price and employment stability, was not enough to end the recession. Unfortunately, President Bush and congressional Republicans refused to consider any form of economic stimulus except tax cuts. They even refused to support an extension of unemployment benefits for workers who had exhausted their 26 weeks of unemployment compensation despite the rapid increase in the ranks of the long-term unemployed. They stubbornly refused to support any increases in federal spending because it did not fit their narrow ideology.

So the first stimulus package was limited to $152 billion worth of tax cuts. It failed to jump start the economy because instead of spending their tax cuts, people saved 80% of it. Today consumer and business owner confidence is even lower. When consumers and business owners are concerned about the future they do not consume or invest. This is why cutting taxes as the

Zandi chart indicates are among the least effective form of stimulus.

Economists have labeled this the paradox of thrift and it was first identified by John Maynard Keynes, the noted English economist. Established economic theory assumes that the pursuit of self interest will be good for the entire economy. But when the economy is doing poorly, people save for a rainy day. While this may be personally rational, it is irrational for the economy as a whole which needs increased aggregate spending to grow.

The economy has lost 2.6 million jobs in the last year and more than a million in the last two months. Milwaukeans are hurting and the County is falling apart.

County Executive Walker's stubborn refusal to recognize these dire circumstances and the need for immediate action has nothing to do with principles. It is the type of reckless zealotry that sacrifices the lives and well being of millions on the altar of a failed ideology.

McCain to Green Bay-trickle down economics works

Senator John McCain claims he's an agent of change and a maverick.

But McCain hasn't changed his faith in trickle down economics.

In Green Bay on Thursday, McCain sang the same old supply side song that Republicans have always sung when he claimed Obama "...will tax the country into a recession."

Earth to John McCain!

We are already in a recession that you and advisers like former campaign chair Senator Phil Gramm created through your blind commitment to financial deregulation!

America is facing the worst financial crisis since the Great Depression. Trillions have been pledged to ensure that the system doesn't collapse entirely. We have lost 660,000 jobs since January. In the past year, Wisconsin alone has shed 23,000 private sector jobs.

The deficit, over $400 billion this year, will pass a half a trillion next! And these deficit projections don't include the money pledged by the Fed and the Treasury to bail out Wall Street!
McCain is wrong, dead wrong, about Obama's economic plan. It will provide a tax break to 95% of Americans, while increasing marginal tax rates on those making over $250,000.

McCain admits he knows little about economics. He apparently also has problems with history.

Shortly after Bill Clinton was elected President in 1992, he proposed and Congress added two marginal tax rates on high income earners, 35% and 39.6%. Much like McCain's doom and gloom projections in Green Bay, Republicans screamed that this would lead to economic ruin. Instead the US economy boomed during the Clinton years, creating 22 million jobs, more than four times the Bush record. Real hourly wages rose between 1997 and 2000 for the first time since the 1970s. And rather than operating at a deficit, the federal government actually ran budget surpluses from 1997-2000.

The Clinton era surpluses were so great, a projected $5.2 trillion, that when George Bush became President he felt the country could afford a tax cut and, like McCain today, that high income tax cuts would lead to investment, growth and prosperity. So he proposed and Congress agreed to cut taxes by $1.3 trillion, a fourth of the projected surplus. Fifty-two percent of these cuts went to the richest 1%, earning over $1.5 million. The result-the most anemic growth, only 5 million total jobs and falling, of any post-World War II recovery, but growing inequality and economic hardship for working Americans.

McCain's Green Bay critique of Obama is the same old, tired trickle down economic orthodoxy that Republicans have always peddled. The message is the same-no change at all. The only thing that has changed is that McCain whom opposed the Bush tax cuts is now the messenger.

Nothing new about Ryan's voodoo economics

First District Congressman Paul Ryan is generating a lot of publicity for proposing "A Road Map for America's Future."

It's not surprising that Republican insiders have enthusiastically praised Ryan's proposal. Their electoral prospects are bleak because their presumptive nominee, John McCain, is running as the heir to President Bush's failed and unpopular presidency. But the mainstream media has also parroted this unwarranted praise.

Ryan's Milwaukee Journal Sentinel op ed on his proposal was entitled "A blueprint to address our financial crisis now." But if you are looking for fresh ideas on how to respond to the sub prime crisis, the explosion of home foreclosures, the bursting of the real estate bubble and the financial meltdown that followed, you will be disappointed. There is nary a word here.

Instead, Ryan resurrects the traditional Republican bogey man,"the explosion of entitlement spending" as the "greatest threat to our nation's long term economic health."

He takes aim at Social Security and Medicare, the two most successful social welfare programs in U.S. history, using chicken little actuarial assumptions that manufacture a crisis designed to undermine popular support. (This will be the focus of separate article/blog.)

These are hardly new conservative targets. Social Security has been a focus of Republican opposition since the 1930s when conservatives opposed the creation of our national retirement and disability insurance program. Republicans also opposed establishing Medicare in 1965 arguing that it would lead down the slippery slope of national health care

The facts, of course, tell a much different story about the causes of the nation's deficits.

President Bush's high income tax cuts enacted in 2001 and 2003 with Ryan's support are responsible for fully 47% of this decades (2001-2011) record deficits according to Congressional Budget Office data.

The $10 billion a month war in Iraq, another failed Bush policy supported by Mr. Ryan, the war in Afghanistan and homeland security account for an additional 37%.

Entitlements, only 9%.

Ryan's solution-more upper income tax cuts, including the elimination of capital gains, dividend, estate taxes and corporate income taxes- are neither bold or new.

They are a continuation of Bush's high income tax cuts.

Capital gains and dividend taxes which Ryan proposes we eliminate have already been slashed to much lower rates (15%) than earned income (35%). As a consequence, hedge fund managers who make billions of dollars managing other wealthy people's money, pay lower tax rates that auto workers, nurses and secretaries.

Warren Buffet, the third-richest man in the world, acknowledged this when he criticised the US tax system for allowing him to pay a lower rate than his secretary or cleaning lady. Mr. Buffett reports that he was taxed at 17.7 per cent on the $46 million he made in 2006, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 per cent.

The inheritance tax , another Ryan target, doesn't even kick in unless an estate has more than $2 million in assets. Only one percent of American estates, mainly the Rockefeller, DuPont, Vanderbilt and Kennedy's heirs, pay this tax. Ninety-nine percent of estates pay nothing.

There is no evidence that reducing these taxes leads to increased productive investment. Mr Buffett argues the opposite-that the Bush high income tax cuts have accentuated a disparity of wealth that hurts the economy by stifling opportunity and motivation.

Ryan also proposes reducing the number of income tax rates from five to two, and reducing marginal rates. He resurrects the long discredited argument that the revenue the federal government loses, estimated at $5 to $7 trillion, will be more than replaced as the economy grows and generates additional taxes.

George Herbert Walker Bush called this "voodoo economics" when it was proposed by President Reagan in 1980. The huge Reagan deficits which nearly tripled the national debt proved him right. Even N. Gregory Mankiw of Harvard, a proponent of tax cuts who chaired the Council of Economic Advisers in the Bush White House. projects that every $1 trillion in tax cuts adds $830 billion to the national debt.

The Congressional Budget Office in a study published under conservative, economist Douglas Holtz-Eakin's leadership, estimated that tax cuts would at best stimulate enough economic growth to replace only 22 percent of lost revenue in the first five years and 32 percent in the second five. On pessimistic assumptions, the growth effects of tax cuts did nothing to offset revenue loss.

Ryan also calls for eliminating the corporate income tax and implies that it is responsible for the nation's sluggish economic growth. The facts again suggest a different story.

In the 1950 and '60 when the United States had its highest post-World War II growth rates, the nation had much higher marginal income and corporate tax rates.

The federal government invested these revenues in its people through the GI Bill, the National Defense Education Act (1958), and the expansion of higher education; in its infrastructure. including the largest public works program in the nation's history, the National Interstate and Defense Highway Act; and into research and science, the National Aeronautics and Space Administration and the Defense Advanced Research Projects Agency. We can thank the former for satellites, Tang and TV dinners and the later for the Internet.

These strategic investments created the human capital, the ideas for new consumer products and capital goods and the infrastructure that stimulated increased productivity, economic growth, increased wages, and the growth of the American middle class.

There is nothing bold, courageous or new in a proposal that amounts to cutting taxes on the richest Americans. The United States has pursued this course for almost thirty years. The result has been declining or stagnate wages for 80% of the country's workers, anemic growth, rising inequality, deteriorating public schools, financially strapped public universities and colleges, 47 million without health care, record deficits and a huge increase in the national debt.

Ryan's proposal to cut the taxes of the wealthiest American is neither bold or courageous. It is simply another version of voodoo economics.

Momentum grows for fiscal stimulus

Economic Policy Institute economist, Jared Bernstein, has a very good blog, Stimulus 101, that explains why an economic stimulus is needed to to jump start the faltering national economy and identifying the most effective forms of federal intervention.

In a rebuke to the Bush administration's penchant for upper income tax cuts he writes:

"Tax breaks for rich people are unlikely to generate much stimulus because those folks are not income-constrained.

For example, ...a dollar of revenue sacrificed for a dividend or capital gains tax cut yields a measly nine cents."

I pointed out in a recent blog that the administration's proposal to make the 2001 and 2003 tax cuts permanent would have no impact because it would not effect the economy until 2011, when the cuts lapse.

The economy needs a jump start now, not three years from now!

Bernstein persuasively argues for short term, targeted spending:

"You get a much better bang-for-the-stimulative-buck from direct spending. A dollar spent shoring up Unemployment Insurance yields $1.73; a dollar spent on fiscal relief to the states yields $1.24. This last idea—ratcheting up state grants from the Feds—is particularly important right now, since many state and city coffers are coming up short due to the local revenue impacts of the housing meltdown.

In short, especially given the ideologies of the folks in charge, we should favor direct spending stimulus ideas over tax cuts."

A New York Times editorial, Not Just the Fed, has joined the chorus calling for action: " ...it is imperative that President Bush and Congressional leaders begin a serious discussion about how to help revive the economy, if need be, with a short-term stimulus package."

Krugman: Bush policies never change but the arguments do!

Yesterday I wrote that President Bush proposes the same medicine, upper income tax cuts, for any economic illness.

When we had a projected $5.2 trillion surplus, he proposed upper income tax cuts because the federal government didn't need all that money.

When the 2001 recession began, President Bush said upper income tax cuts (phased in over nine years to conceal their long term cost) was the solution.

When gas prices began to rise in May, 2001, he again said the answer was upper income tax cuts.

Now that the economy is sliding into a recession, he is again arguing that we need to make his high income tax cuts permanent.

No matter what the problem, upper income tax cuts are the only solution.

Paul Krugman makes the same point in his recent column :

"You see, for 30 years American politics has been dominated by a political movement practicing Robin-Hood-in-reverse, giving unto those that hath while taking from those who don’t. And one secret of that long domination has been a remarkable flexibility in economic debate. The policies never change — but the arguments for these policies turn on a dime.

The entire column is worth reading.

Bush's sudden passion for fiscal discipline is hypocrtical

The New York Times wrote today that:

Mr. Bush’s sudden passion for fiscal discipline is hypocritical...

This White House is guilty of runaway spending — on the war and on tax cuts for the rich. Ending the war and rolling back excessive tax cuts are the way to control spending, not cutting needed government services."

I couldn't have said it better myself.

In fact, I did say it myself when on September 29, 2007 I wrote:

The two main causes of the Bush era deficits are its high end tax cuts and the War in Iraq.

Congressional Budget Office data show that Bush's tax cuts have been the single largest contributor to the reemergence of substantial budget deficits. Legislation enacted since 2001 has added almost $2.3 trillion to deficits between 2001 and 2006, with half of the deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and only a sixth to increases in domestic spending).

56.5% of these tax cuts went to the richest 10% of wage earners, those averaging $256,000. Only 14.7% went to the bottom 60% who average $44,000.

Unlike in previous wars, the United States has cut taxes at the same time it has increased military spending."It's fair to say all of the money spent on the war has been borrowed," says Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, a think tank in Washington. "But eventually everything has to be paid for."

And the bill is growing!

Just last week President Bush requested an additional $42.3 billion in “emergency” funding for Iraq and Afghanistan. If passed, the 2008 war bill will be almost $190 billion, the same as the 10 year Farm Bill increase the Journal singled out for criticism and the largest single-year total for these wars. It is an increase of 15 percent from 2007.

It will bring the year end total for the Iraq and Afghanistan wars since Sept. 11, 2001 to $800 billion, still less than half the $2 trillion total projected cost.

As Illinois Senator Everett Dirksen once said about the Defense budget, "a billion here, a billion there, pretty soon you're talking about real money"-money that could buy a lot of healthcare, infrastructure, early childhood education or deficit reduction!

Read the entire New York Times editorial here.

Milwaukee Journal: perscribes wrong deficit reduction medicine

A Milwaukee Journal editorial recently opined that "A Republican Congress abandoned its principles and left the country ill-prepared to meet long-term obligations." "Fiscal discipline is needed" it concluded.

The piece criticised the $190 billion 2002 Farm Bill, 70% of which went to the richest 10% of farmers. It also targeted the new Medicare prescription drug benefit.

Both could charitably be described as socialism for the rich-U.S. agribusiness, insurance and pharmaceuticals companies!

While they are poorly designed public policy, neither is at the heart of the deficit problem.

By failing to identify how the Bush administration has squandered a projected $5.2 trillion surplus, the Journal is fueling the erroneous perception that out of control social spending and entitlements are to blame.

Nothing could be further from the truth

The two main causes of the Bush era deficits are its high end tax cuts and the War in Iraq.

Congressional Budget Office data show that Bush's tax cuts have been the single largest contributor to the reemergence of substantial budget deficits. Legislation enacted since 2001 has added almost $2.3 trillion to deficits between 2001 and 2006, with half of the deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and only a sixth to increases in domestic spending).

56.5% of these tax cuts went to the richest 10% of wage earners, those averaging $256,000. Only 14.7% went to the bottom 60% who average $44,000.

Unlike in previous wars, the United States has cut taxes at the same time it has increased military spending."It's fair to say all of the money spent on the war has been borrowed," says Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, a think tank in Washington. "But eventually everything has to be paid for."

And the bill is growing!

Just last week President Bush requested an additional $42.3 billion in “emergency” funding for Iraq and Afghanistan. If passed, the 2008 war bill will be almost $190 billion, the same as the 10 year Farm Bill increase the Journal singled out for criticism and the largest single-year total for these wars. It is an increase of 15 percent from 2007.

It will bring the year end total for the Iraq and Afghanistan wars since Sept. 11, 2001 to $800 billion, still less than half the $2 trillion total projected cost.

As Illinois Senator Everett Dirksen once said about the Defense budget, "a billion here, a billion there, pretty soon you're talking about real money"-money that could buy a lot of healthcare, infrastructure, early childhood education or deficit reduction!

What it hasn't bought is protective equipment for our soldiers and their vehicles, the capture of Osama Bin Laden or adequate medical care for our vets!

And remember this $42 billion military increase is off-the-books, "emergency" funding, an addition to the original 2008 spending request, made before the President announced his so-called “new strategy” of partial withdrawal.

Iraq alone has cost the United States more in inflation-adjusted dollars than the Gulf War and the Korean War and will soon pass the Vietnam War.

This for a war that former Defense Secretary Donald Rumsfeld promised would cost under $50 billion while his deputy, Paul Wolfowitz, predicted Iraqi oil revenues would largely pay for Iraq’s reconstruction.

The $42 billion emergency funding increase is more than the bipartisan, fully funded $35 billion expansion of the State Children’s Health Insurance Program (SCHIP) that President Bush has promised to veto.

Since Iraq costs the country $333 million a day, we can't afford to expand SCHIP which costs $19 million a day!

The $42 billion is also almost twice as much as the $23 billion in improvements for waterways and water systems in every state that Bush is threatening to veto as too costly.

Mr Bush took office in 2001, the last time the Government produced a budget surplus. Every year after that the Government has been in the red. In 2004 the deficit swelled to a record $US413 billion ($494 billion).

The Journal is right when it suggests that Mr Bush is mortgaging the country's future. But it is wrong to suggest that entitlements and social spending are to blame.

High end tax cuts and Mr Bush's war of choice in Iraq are the real culprits!

Greenspan rewrites history!

Alan Greenspan is revising history and the role he played in supporting the Bush administration's irresponsible fiscal policies.

In his new memoir, Age of Turbulence: Adventures in a New World, he is harshly critical of President Bush, Vice President Dick Cheney and the Republican-controlled Congress, as abandoning his party’s principles on spending and deficits. "My biggest frustration remained the president's unwillingness to wield his veto against out-of-control spending." Greenspan wrote.

Either Mr. Greenspan is suffering from amnesia or he is purposefully rewriting history to conform to his libertarian views! Either way, Greenspan ignores that it was the Bush tax cuts which he aggressively supported, that are primarily responsible for the era's deficits, not "out-of-control spending."

Congressional Budget Office data illustrates that the $1.3 trillion 2001 tax cuts, 45% of which went to the richest 1%, have been the single largest contributor to the reemergence of substantial budget deficits in recent years.

According to the CBO, legislation enacted since 2001 added almost $2.3 trillion to deficits between 2001 and 2006, with half (51%) of this deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and about a sixth to increases in domestic spending).

Mr. Greenspan played a crucial role in getting this legislation passed.

President Bush initially proposed tax cuts during his presidential campaign in response to a projected $5.2 trillion surplus.

Opponents argued that it was folly to base tax cuts on projections and that any surpluses that might materialize should be used for necessary social investments (repairing New Orleans levies and the nation's ailing infrastructure, investing in education, etc.) and to pay down the national debt.

By the time Bush was inaugurated, the dot.com bubble which Greenspan had helped create through his support for capital gains tax cuts in the 1990's, had burst and the economy was slowing. The recession officially began in March 2001.

President Bush appeared to lack the Congressional support necessary to enact his high end tax cuts. He had lost the popular vote, his installation as President was controversial, and the Senate was divided.

But Greenspan, seemingly more concerned with providing political cover to the new president than the nation's economic health, aggressively supported the tax cuts.

In late January 2001, Greenspan said: "It is far better, in my judgment, that the surpluses be lowered by tax reductions than by spending increases," assuring Congress that the tax cuts would not endanger future Social Security benefits.

In response to White House spokesman, Ari Fleischer, praised the Federal Reserve Chair, "We are very heartened to see that Chairman Greenspan has weighed in on the importance of cutting taxes, and hope that the Congress will join President Bush and Chairman Greenspan in cutting taxes, in passing the Bush tax cut, so we can protect the strength of our economy."

Greenspan's support was crucial mustering the votes to get the tax cut legislation passed.

In 2003 with deficits soaring, the Federal Reserve Chair supported yet another round of deficit-creating high end tax cuts proposed by President Bush.

These tax cuts created large deficits rivaling those Greenspan had insisted must be closed in the early Clinton years. But now Greenspan supported making Bush's tax cuts permanent at a cost that was more than five times the amount necessary to close the projected shortfall in Social Security over the next 75 years.

Then in a truly remarkable bait and switch, Mr. Greenspan called for cuts in social security to restore fiscal discipline. Not surprisingly his conversion to cutting social security benefits coincided with President Bush's ultimately unsuccessful effort to dismantle the system through privatization.

Despite current protestations, Mr. Greenspan was not a critic of the Bush administration's fiscal irresponsibility. When it mattered, at every key junction, Mr Greenspan aided and abetted the Bush administration's reckless economic policies. Buy the book, if you must. But don't believe the hype.