Originally published on The Agonist
From World War I until Gulf War II – these are the bookmarks that define the American Century. All through this period the United States enjoyed economic, military, and political ascendance, and by the time Germany surrendered in 1945, the United States was the preeminent global power in so many dimensions that it truly “owned” the 20th century. In the realm of finance, American supremacy was symbolized by the AAA rating accorded its government securities, a rating the United States has enjoyed since 1917.
Now the United States has lost its AAA rating, and deservedly so. It has shown itself incapable of dealing with many serious financial and economic problems, One of its two major political parties has deliberately – yes deliberately – attempted to force a default on US Treasury securities, so that it can engineer its vision of a fiscally prudent America, one in which it is forbidden ever to raise taxes on wealthy people. This despite the fact that, other than corporations, wealthy people are the only source of incremental tax revenue for a government desperately in need of cash flow.
This is a disgrace, an eternal shame on the American political leaders who allowed this situation to develop. But one man above all others stands out as responsible for this tragedy: George W. Bush. George Bush came into the presidency with so much money in the treasury that it was possible to see the national debt retired completely if he continued on a path of budget surpluses. Instead, he chose the opposite. He initiated a series of massive tax cuts that were heavily skewed towards rich people and corporations. Within his two terms, he managed to rack up a level of deficit spending that exceeded the combined deficits of all previous presidents. This deficit spending – which was really nothing more than a give-away of the nation’s wealth to rich people – now weighs like a pair of cement boots on a country desperate to keep its head above water.
He had accomplices. He had an imbecilic Vice President in Dick Cheney, who asserted that “deficits don’t matter.” Cheney said that he learned this lesson from Ronald Reagan, the patron saint of the modern Republican Party, who certainly shares some of the culpability for his naïve adoption of “supply-side economics”, a get-rich-quick scheme that promised tax cuts would be met by even greater tax revenues as the private sector put its “own money” to work expanding its business and hiring people. It never worked that way in reality. The private sector squandered the money on useless luxuries, while corporations enriched their executives with bonuses for their assiduous efforts at out-sourcing American jobs to Asia. The gulf between the wealthy aristocracy and everyone else has grown to such an extreme that the US ranks ahead of Brazil and Mexico in terms of economic disparity.
George W. Bush presided over the largest wealth transfer in the history of the country. He also presided over a political party that made it a mortal sin ever to increase the taxes of the wealthy, thus locking in this discrepancy among the classes, and allowing a nepotistic oligarchy to arise. This is certainly one way to destroy a democracy, and the results are now evident for all to see. The Congress is composed of millionaires, and is funded by corporations, who engineer tax breaks for themselves while they close down plants in the US and ship them overseas. The Republicans block every effort to raise taxes or in any way shift the tax burden away from the middle class and poor people, and back on to the wealthy. They are happy, however, to carve away the social safety net, because that comports with their belief that social spending is a waste of money on the lazy and ungrateful masses.
Historians will argue whether the economic, military and political decline of the United States in the 21st century was inevitable, given the rise of China and other emerging markets powers. Certainly there are sound arguments in favor of this view – look at the troubles Europe is having maintaining its living standards in the face of so much intense economic competition from Asia and elsewhere. But if you accept that the United States was inevitably going to have to share power with other nations in this century, the US still had the means to control how this happened. The US could have created a gentle process of shared political and military power, avoiding confrontation with China, India, Russia or other countries, and developing ways in which regional conflicts of any sort could be managed in a multi-polar world. Economically and financially, the US could have kept its financial house in order and maintained its AAA rating for many decades more. This would have maintained the dollar as the reserve currency of the world.
None of this happened. The United States under George W. Bush brandished its unchallenged military might as a tool to recreate the world in its own image, especially that part of the world that sold oil to an energy-dependent America. George Bush went to war – he always wanted to be a war president to ensure his place in history as one of the greatest presidents of all. His wars, however, were paid for not with cash raised from taxes, but with borrowing, because as Ronald Reagan taught us, “deficits don’t matter.” Bush compounded this error by giving away hundreds of billions of dollars every year in tax revenue that the wealthy were expected to pay. He authorized very costly tax holidays and deferrals for corporations. In essence, he bankrupted the Treasury. That is the only way you can describe it when you consider that just a week ago the US Treasury, at the height of the debt ceiling crisis, had only two or three days worth of spending money left in the cash till.
The only defense Bush has is to argue that the practice of borrowing for current needs was well established at the federal government by the time he got to the White House. But this is a defense which damns the Republican Party, because all of the ramps up in the public debt were initiated by Republican presidents, especially Ronald Reagan and George W. Bush. The periodic retreats into fiscal rectitude were initiated by Democratic presidents, especially Bill Clinton.
This isn’t to paint the Democratic Party as fiscal saints. Plenty of Democratic Congressmen have enjoyed loading up budget bills with their favorite programs, financed only by debt. But at least the party seriously followed pay-as-you-go principles when in control of the Congress. The Republicans have recently discovered the virtues of this approach, but their goals are not really to balance the budget, as much as to destroy the domestic social safety net. The wealthy and corporations still get a free pass under Republican austerity programs, while the poor and middle class pay a larger and larger bill.
No, things did not have to turn out this way. Whether by malicious design, economic naïveté, or intellectual laziness, George W. Bush forced the nation down this path. The first serious consequences of his presidency are now upon us, with the loss of premier financial status. Next up, probably several years down the road, will come the loss of the dollar as the globe’s reserve currency. Americans will enjoy for the first time paying for oil in someone else’s currency.
When you hear Republicans and Democrats argue over who was responsible for the loss of our AAA rating – pointing fingers at Barack Obama or the Tea Party congressmen - take a step back a minute. Think what might have been if the Supreme Court had awarded the presidency to Al Gore in 2000. It won’t take long for you to realize that, along with trillions of dollars of debt we owe to the rest of the world, we should reserve a special debt of loathing for George W. Bush.
we're continually sucked into a "non-debate" debate
Just like solutions. They drown out any real solutions, sane policy. For example, you never heard mentioned a VAT or a transaction tax on flash trading.
To ignore Bush and the original disasters like you point out is another case in point.
The rhetoric battles are inane and ignore facts and history.
Getting the facts straight. Thank you!
We could have retired the national debt given the progress Clinton had made. Good grief! That's the fact that needs to be discussed, reiterated. We cannot proceed without knowing the truth of how we got to where we are. This sets the record straight.
The Tea Party, their patrons who pull the strings, and the rabid Republicans are the proximate cause of the most recent deficit delusions. However, those who go along with them, like Obama, without ever mentioning key facts as outlined in your essay are to blame, in large part. How do we ever get out of this without knowing the truth. That the truth is not told by those who know it is telling.
Obama is a novelty in the history of the presidency since FDR, call it the modern era. He was elected as a moderate liberal, the anti-Bush, with full cooperation from his campaign. Then he immediately shifted to Republican policies. He is the first of the modern presidents to completely betray his party and implied principles. This creates a problem since those most active in politics are aware of this, a deliberate deceiver occupies the White House. Nixon, both Bushes, Clinton, Carter, all of them behaved within a range of their self-stated positions. Obama left a trail crumbs that can be referenced for his current behavior. But the substance of his campaign was more progressive than not. He not only pulled a bait and switch on policy, he paved the way for the election of one of the Republican lunes. What a legacy. His sociopathic behavior approaches that of George W Bush.
Implied, not stated
Michael, you betrayed your own implied principles.
A president should state his principles. Not imply them.
That you delicately covered up for this shows how painful this whole Obama presidency has been, particularly for people who wanted so much to believe in him, and in the principles they believed in. But he only implied.
I do agree that his behavior comes across as valuing nothing other than power. That is why I didn't vote for him, even though I supported his Senate campaign in IL. When the DNC ran him so fast for president, I realized then I'd been suckered into a Money Party scam. All I could do was try not to hurt myself further. Kind of like the first date with a hot new guy, and he does something really obnoxious, and your red flags go up...then when he does it again, even though you told him it's a problem, a wise person with good boundaries cuts their losses and gets outta there.
Right now we have a lot of people waking up to what they gave away, in their zeal to believe in the combination savior and mystery date they projected onto Candidate Obama.
Mr. Obama in my view is a rather typical Generation Jones pragmatist. He implies certain ideals. But he lives for the main chance, here in the backwash of Baby Boomers.
Thanks for reading my thoughts.
Pragmatism and opportunism
"Mr. Obama in my view is a rather typical Generation Jones pragmatist. He implies certain ideals. But he lives for the main chance, here in the backwash of Baby Boomers." -- Animist Drive-by
Excellent summary of Obama. The question is, Where does pragmatism end and opportunism begin?
Great phrase, "backwash of Baby Boomers"! The best of them are all around watching their pensions and social security shrink, after many years of diligent work.
Anyway, who gives a hoot about the pragmatism/opportunism of politicians? Like sex, the sell-out actually existed before the Baby Boomers discovered it. And, like sex appeal, it's how you use it that counts. George Washington, Abraham Lincoln, Franklin Roosevelt, John Kennedy ... they were all pragmatists-opportunists who pursued and seized the main chance as if their lives depended on it (which in some instances it did).
You were right to vote for Obama for the U.S. Senate. He might have made a great senator, if he had not been chosen to run for President.
Enthralled by the White House and the "most powerful man in the world," we pay too little attention to our Congress, to SCOTUS appointments and to the laws that are enacted in our name. Especially today, in 2011, the message should be clear, written in $$$$$.
We are all hypnotized by our presidential system! We don't elect presidents such as was intended by the Founders. Every four or eight years, we elect a god-king! It's as silly as the idea that big-time corporate CEOs -- or generals or admirals or big-time football 'heros' or (heavens help us) 'talking heads' or Speaker of the House or Chairman of the Board of Governors of the Fed -- are ipso facto admirable people. Of all those, the POTUS is most likely to be criticized publicly, but least likely ever to be held accountable in practical terms.
To paraphrase F. Scott Fitzgerald, "Let me tell you about Presidents. They are different from you and me."
Geithner to stay as Treasury Secretary until 2013
Geithner just announced he will stay as Treasury secretary until 2013. Unbelievable for it was the assistant to the Treasury that had any guts to confront S&P on the $2 trillion error.
Geithner rolls over so we can expect more of the same. More amazing is Goolsbee. Seems the left likes him and even though he is leaving the White House, and is so likable..
he is a pure economic fiction imbecile, especially on trade and I know many a person tried to get him to read a trade agreement. Classic Chicago school statistical blinders.
Sorry, great personality, but economics? Hmmm, should have stuck with stand up comedy.
Winston Churchill said......
"You can always rely on the American People to do the right thing....... once they have axhausted all the other possibilities"
The questtion now is when will the American people finally come to their senses and actually do the right thing in this case, and when they do, will it be too late anyway?
There are few "Very Serious Persons" now advocating the right approach, other than Pual Krugman, Robert Reich, Joe Stiglitz and a few others. And in fact, most VSPs are advocating economic policies that even a first year student of macro economics would tell you was complete bullshit. The one bright spark in this morass of magical thinking is that The Economist, hardly a left-wing paper, is itself finally saying that these "supply-side", "trickle-down" policies are f***ing nonsense, and that, we truly are, as Paul Krugman has been saying since 2008, in a liquidity trap.
It is obvious to me, and seemingly to most CEOs, who are sitting on upwards of $2 TRILLION, that our problem is lack of aggregate demand, because of the over-indebtedness and lack of purchasing power of ordinary American working people. This problem really started with the policies of St. Ronnie, but took off like a bandit with Georgie boy.
But Americans continue to vote for the Koch brothers front groups like the Tea Party. And I am not sure whether they are just blindly or willingly ignorant, or even which is worse.
"All of the ramps up in the public debt were initiated by Republican presidents, especially Ronald Reagan and George W. Bush. The periodic retreats into fiscal rectitude were initiated by Democratic presidents, especially Bill Clinton" and you might add, yes, the malaise-tained Jimmy Carter who allowed interst rates to rise to squeeze stag-flation out of the US economy and sacrificed his presidency to do so.
It is good to see the above in print, finally! For the life of me, I cannot fathom why the "money" people on Wall Street continue to accept and propagate the myth that Republicans are good steards of American wealth and standard of living.
Why the myth
Anonymous Drive-by asks "why the 'money' people on Wall Street continue to accept and propagate the myth that Republicans are good stewards of American wealth and standard of living"?
Reason #1. Those people couldn't care less about America, they are internationalists. Their loyalty is to their incomes, after taxes. There is no 'Wall Street' in the old sense, there is only global capital. The U.S. to them is nothing but another Enron, about to go under. Corporate media hates the term 'global capital' and it sounds somehow 'leftist' to use it ... but it is what it is.
Reason #2. These are generally the worst kind of sales people. Lying is how they make a living. They don't mean what they say, and they don't say what they mean. Especially in public. They don't even have the concept.
Reason #3. Because progressive Democrats in Congress -- helped out by a few populist Republicans -- actually might do it, profiteers within the system of global capital (for example, dealers on the NYSE) fear that someday a Democrat-controlled Congress, if unrestrained by a powerful RNC-backed propaganda system, might actually reform the Internal Revenue Code and take away their tax evasion (avoidance) systems. Realists such as most here at EP probably are thinking, "Ah, if only those fears were well-grounded!"
It may sound 'leftist', but ...
... the more descriptive term, depending on context, is 'global capital' -- NOT 'Wall Street'.
Of course, in some contexts, the term 'global markets' is appropriate, but that sounds 'rightist' or 'neo-liberal' or 'globalist'.
"President Obama tried to reassure global markets today." -- BBC's North America news broadcast, 8 August 2011.
NOT "President Obama tried to reassure Wall Street"!
The BBC spin was, on the face of it, ridiculous ... you can't reassure markets anymore than you can reassure the weather. President Obama's intent was to reassure global capital ... but to use the term 'global capital' would have been politically incorrect. Corporate media likes to maintain the fiction that the real important stuff is still being run from New York by 'our' guys, that is, 'Wall Street'.
I think 'Wall Street' is an antiquated myth, unless it refers to the financial part of the FIRE lobby in Washington, D.C., but then why not call it what it is?
We have not quite reached the point where there is no such thing as the 'U.S. economy,' but have we not reached the point where there is no such thing as 'Wall Street'?
The Clinton Budget Surplus Myth, and Other Nonsense
This article has so many gratuitous assertions and outright lies that it's hard to know where to start. Maybe a few bullet points would help keep things short and to the point:
Although Clinton paid down the Public Debt, he did it by increasing Intra-govt holdings, mostly by using excess Social Security funds generated by the incomes generated by the dot-com bubble. A large percentage of the tax revenues during that period were from capital gains taxes, again from the dot-com bubble.
Three years into Obama's first term shows us the results of his policies - it's his economy and there's no way a reasonable thinking person can blame Bush for the current mess and still be in touch with reality. This pathological Bush hatred has really become old, especially the part about the 2000 election. Gore lost EVERY recount that was conducted - get over it.
this is pure spin and fiction
First, the Heritage foundation is no source, they are a conservative lobbyist organization who loves to write fiction. Secondly, by percentages is also spin on tax cuts. Thirdly, the budget surplus was not the result of "raiding social security"
and forth, no spin. Sorry, we don't allow some sort of lobbyist fiction spin that tries to lie, especially with bogus statistics.
Folks, this is a great example of statistical spin with graphs. You can find this on Fox news quite often and it's beyond obscene in how manipulative it is. Spin and lies with numbers.
My goodness! We must have hit a nerve
Robert has mentioned lately that traffic has been picking up here at the Economic Populist. More and more people are starting to pay attention to what is being published on this site. But who could have expected this? A visit from a card-carrying apologist for the Bush administration!
Liberals consider that we've earned a wing if someone bothers to come by and attempt a rebuttal using right-wing arguments. You get two wings if the attacker uses charts from either the American Enterprise Institute or the Heritage Foundation. Robert is better equipped than I am to explain the peculiar brand of specious reasoning and data manipulation that constitutes "research" at these two distinguished members of the right-wing propaganda program.
But then - to be told we have pathological Bush hatred, and that we must "get over it" when it comes to the 2000 election - why this is the Holy Grail of liberal abuse. I use to have a boss who specialized in buying up other companies and finding "synergies" that would travel straight to the bottom line. This was corporate speak for being able to fire lots of people, and naturally he was well-loved by Wall Street. He would travel to the newly conquered subsidiaries or divisions, bodies littered all over the place, and he would tell the remaining staff there - "Just get over it." It was, and I imagine still is, his favorite phrase. It was all of a piece with the right wing encouragement to "move along, nothing to see here", which is always to be found when there definitely is something to see there - something unpleasant and uncomfortable for those who love to extol the beauties of the free market, and the noble contributions corporations and wealthy people make to American society.
We have an example right here, when Paladin tells us that the top 10% of all wage earners paid 70% of all income taxes as of 2008. Well that certainly sounds noble, until you realize that the top 10% own more than 70% of the nation's wealth, and that they specialize not so much in "earning a wage", as they do in earning dividends and achieving capital gains. It is at this point that we are encouraged to look aside - there is really nothing to see there - especially the part where the top 10% have managed to exclude most capital gains from the greedy hands of the tax man.
I do hope Paladin stays around here - sans the Heritage Foundation tables. Paladin will find that the "far left", or whatever we are at the Economic Populist - have our fair share of "Obama hatred", or whatever you get when one feels betrayed by the person you actively supported for higher office. Our colleague Michael Collins has been writing lately about what happened to Obama and why, and I hope he will publish further insights. They will surprise Paladin, because one of the peculiar things about the far right / far left divide is that the two sides of the spectrum are beginning to meet up more and more on certain issues. I, for one, am as alarmed about the parlous state of federal government finances as any Tea Party patriot. As I put it in something I wrote recently - when you are borrowing $100 billion every month in fresh money, you are effectively creating another Department of Homeland Security each month, because that is its annual budget. Something is deeply wrong with that picture, and a day of reckoning is inevitable.
I just wish the Tea Party people wouldn't play around with the good faith and credit of the United States - which after all is (or was) a legacy bequeathed to us by our parents and grandparents, who expected we would have the common sense and discipline to maintain those standards. Alas, we do not, certainly not when one side of government takes the whole Congress and economy hostage, and refuses to offer up the slightest access to the wealth and income of the top 10% of wage earners.
I do hope Paladin is not one of those people who are erecting moats and castle walls around the wealthy and privileged so that they can continue to avoid contributing to this country in their quest for oligarchical heaven on earth. If Paladin were one of those people who would join us in insisting that everyone in this country contribute their fair share in consideration of the wealth and income they have enjoyed by virtue of the laws, the courts, the political system, and all the other infrastructure that allows wealth to beget further wealth - if Paladin were to join us in this effort, why that would be something that would definitely worry somebody. That is because it is in somebody's interest that the right and left not talk to each other, lest we discover common ground that would be very dangerous for the powerful and wealthy who benefit from Americans attacking Americans, throwing their Heritage Foundation charts out, only to be met with New York Times graphs. That fight between the far right and the far left is just as useful to some people as pathological Bush or Obama hatred, and that fight makes it a lot easier to manipulate people into "moving on" and "getting over" our grievances, which by and large are about the same things.
banned due to economic fiction
He's banned due to very obvious reasons, but the #1 sacrilege on this site is posting bogus research or statistics to claim your agenda or belief is "true". That's AEI, Heritage, CIS, La Raza, Compete America or even NBER. Anyone who puts out bogus claims, manipulates data and especially mathematical equations is banned.
I focus heavily on these various spin lobbyists and agenda people because most people cannot do basic ratios, much less read a mathematical labor economics equation with 20 variables and calculus.
So, a white paper with fiction is given and then people who have no idea that it's full of lies wave it around in the air as if it's truth.
Sorry people, they can lie with statistics, graphs, numbers and maths and I see it all of the time.
Anybody who could read mathematics for example, would know the entire concept of a CDS is based on faulty mathematics. The Copula is not designed for "many to one" relationships, the math requires a 1 to 1 data input value to be valid.
Anyone at all in Government bother to say "hey, that's invalid mathematics, we cannot allow these to be used". Hell no.
This site was founded on the idea that we should plain look at the data, the facts, for ourselves and analyze. Corporate sponsored, or special agenda sponsored, so called "think tanks", along with some seriously corrupted Academics, who spin with data and mathematics to claim some agenda they have is "good", disgust me. It's completely opposed to the once America value that one should be objective in any research and let the conclusions write themselves. i.e. it used to be sacrilege to fudge your data and results.
Now that same behavior which would have gotten you shunned by any scientific community is not only entering the scientific community (see pharmaceutical clinical trials!), but is routine in the soft sciences, such as public policy and economics.
One can go on FAUX news, a complete concrete brain, never an objective fact will enter into it, and run 24/7 statistical lies and upside down economic theory.
It's a lie, it's misleading and it's one of the things I believe is destroying the U.S.
Since when is it ok to just make up stuff to say some conclusion you believe? Since when can one just claim I believe as a rational for economic agenda?
It's absolutely stone age.
In China, they have a super economics architecture team of 20 and almost all of them used to be engineers. They don't put I believe in anything. They have 5 year plans, executed with precision.
Over in the United States we have people making up charts, graphs and even fictional mathematical equations to claim up is down and left is right.
Is reference to CIS "Center for Internet Security" or maybe to CSIS "Center for Strategic and International Studies"?
CSIS has had some interesting stuff about Russia and Eastern Europe, and I understand that it's closely associated with the U.S. government (not that that would make it reliable).
BTW: do you consider CIA demographic webpages to be accurate? As long as you look at the source details and sometimes adjust accordingly, I have assumed them to be.
Center for Immigration Studies
Even the GAO, who to me has the best ability to do objective analysis, one of them, one needs to read everything from 1st principles and have a critical eye.
I was just listing various lobbyist, or agenda groups and did a counter to the "open borders" spin you get from these "unlimited migration" groups.
Center for Immigration Studies actually has a lot of credible research, but bottom line you need to watch out.
While AEI, as an example, is consistently full of shit, I believe it's Heritage or one of these groups who has a researcher on China, where the research is credible...
But some are worst than others, with these two being at the top of the spin lists and why I try to keep these lobbyist spin papers off of the site.
Darned acronyms anyway! "Center for Internet Security" is what came up on my Google search.
The 70% Tax Bracket (Pre-1981)
Like a litmus test, we have Paladin saying we have 70 Ordinary Income brackets on Federal Income tax! Reagan made that 70% Bracket go away in 1981. The maximum personal income bracket is 35% and 14% for capital gains. (This is how Buffett pays a lower rate of tax than his receptionist). Hedge fund managers, pay their tax at the 14% rates by converting all ordinary income to capital gains. Receptionists pay 28%.
I would like Palladin and the rest, to answer this puzzle. Why did the economy boom in 1950 when tax rates for corporations were at the expropiratory rate of 90% with the Excess Profits Tax? GDP in 1950 grew over 10 percent, likewise PCE and Fixed Investment, all over 10 percent.
he's a troll banned
If you want to write up a post pointing out the real tax rates, refuting this inane stuff but he was banned immediately for this is the same sort of lies/spin one sees from GOP operatives, FAUX news and I suspect he's a lobbyist plant or paid comment spam person or something, but assuredly not interested in discussing real facts, figures, ratios from this one comment.