It's Not Governance

Are you enjoying the show? Well, I hope someone is because the political theatre we've been witnessing over the last month or two has been very painful to watch. I'm talking about the debt ceiling negotiations that have occupied the media and the markets, while keeping our government from functioning for quite some time now.

I'm no economics or political science professor; but, I'm guessing most of you aren't either. So let's just take a look at the current situation from a practical and, hopefully, honest position. Maybe that way we can try to understand this mess. And a real mess it is. But in my estimation it's far more of a political mess than anything else.

First let's look at how we got here. Our nation has about a $14 trillion dollar debt. We have more bills coming due than we have money coming in right now to pay those bills. So, we have to borrow more money to pay our bills. The Treasury Department would like to borrow about two and half trillion more to make it through the next couple of years. Please note that this money is not for more spending- it is for money we already owe. If we don't allow the government to borrow that money the U.S. will default, meaning we can't pay all our bills. In that case The President and the Treasury will decide which bills they will pay and which they won't. Fact: some bills won't get paid (Social Security? Medicare? Military/VA benefits?Unemployment benefits?). Fact: financial markets will react worldwide-negatively. Fact: Interest rates for everyone of us will go up a lot. Fact: Consumer goods, durable goods, auto industry, and real estate, markets will completely dry up. (And, those markets are hurting pretty badly now.)

Let's look at where all that debt came from. A full three quarters of our national debt came from the following sources. It came from fighting two wars over the last ten years. We have been spending about $2 billion a week- That's well over $100,000,000,000.00 a year for ten years! It also came from a Medicare prescription drug program (Medicare Part D) that is estimated to cost over a trillion dollars over ten years. What's interesting is that when it was passed- it wasn't included in the federal budget. It was passed as a supplemental appropriation- just like those two wars. Then there were the Bush tax cuts that added $1.3 trillion in lost revenue, with most advantages going to the wealthiest 2%. The last major source of this debt is from reduced revenues caused by this Great Recession. Even though Republican are insisting on cutting Social Security now as a response to the debt ceiling crisis, Social Security has not added even a penny to the debt. The Social Security Trust Fund is solvent until 2037.

Let's look at the history of our economics over the last 30 years. I believe we've been fooled very badly into believing what politicians say instead of what economists say. Over those years politicians have promoted "trickle down economics" which means that when industry owners and capitalists get rich from tax breaks, tax loop holes, and deregulation they share the wealth on down the line. Politicians also promoted something called "supply-side economics", which means that capitalists and industrialists produce more goods (supply) than consumers demand, and the consumers will purchase those goods just because they are available, even if they use credit to buy them. In fact easy credit is part of the system. I'm sure we all remember credit cards just appearing daily in our mailboxes. The trouble with these economic theories is that they don't work. They never have over any more than short periods. That's why politicians promote that stuff instead of economists. Real economists know better. But I think even we (non-economists) know that demand creates economic growth- not supply.

A few other things happened over the last thirty years based on these political theories about our economy. The rich got appreciably richer while middle class income stagnated. Corporations and the wealthy, (i.e. Job Creators) have shipped millions of American jobs to other countries, while creating a trade deficit that is hurting this country very badly. In addition America has gone from being a creditor nation to the biggest debtor nation in the world today.

Let's look at the political landscape. President Bush's policies are directly responsible for creating this mess. He got us into these wars using dubious reasoning and facts. He instituted the Medicare Part D program that was unfunded and served as a major giveaway to the drug companies because it disallowed any price bargaining. He took a surplus and gave it away to the rich in tax breaks. His policies deregulating our banking system and promoting what he called "an ownership society" led directly to the real estate bubble and the financial markets' crash of 2008, and plunged us into this recession. But I don't let President Obama off the hook either. Mr. Obama has failed to generate any hope, by being aggressive about job creation and has allowed the Republicans to control the debate and the message. I'm not sure why anyone would hope for honest negotiations with people who have said publicly their main objective is to destroy you. Quite frankly the Republicans have been highly successful in giving this President nothing- no real comprehensive health care reform, no effective economic stimulus package, no Senate confirmations on key posts and judgeship's and no honest deals on the debt ceiling. So he clearly needs a new strategy- this one isn't working. But it was never intended to work. The other side is focused on making him "a one term President". They said it and they meant it. They are the party of NO!

Meanwhile, 14 million Americans are out of work. Getting them back to work will create demand and help end this recession, but that's not where our government's head is now. It's on 2012. The President asked for a deal going past 2012 because he doesn't want this thing clouding the election, and the Republicans only offer a short term deal because they do want it clouding the election. Their political fate rests on the failure of the country and the President. I'm with the President on this point. Can you imagine the chaos of this thing happening during an election? Speaker Boehner always complains that companies aren't hiring because of "uncertainty" - but now he insists uncertainty be built in to any deal. Not very honest, sir. When it comes to honesty we have to ask where these deficit hawks were when President Bush added $5 trillion to the national debt. They just quietly raised the debt limit seven times and followed the dictates of Dick Cheney who famously said, "deficits don't matter".  We wouldn't even be talking about this if John McCain had been elected, even though we would still have the same debt issues. Politics- but not honesty, then or now.

So here we are watching this hapless bunch play out their game- only the stakes are very high. This is all great theatre- but it is not governance. Perhaps it is too much to expect statesmanship. But a fair degree of honesty and statesmanship would go along way toward restoring our national confidence. Let's demand governance.

Thanks for looking in.