Tuesday, August 2, 2011

Crisis Averted

That will be the headlines. “Crisis Created and Nearly Implemented” is what should be the headline. This was the fruits of the 2010 elections. Republicans, who for years had no problems with massive deficits, and as a matter of routine increased the debt limit without blinking an eye, now took aim on deficits during a Democratic Presidency and an economic recession of Republican making.

The cause of the deficits is really pretty simple. You have a nation at war, that doesn’t want to pay for it. You have a nation that has made commitments to its seniors, who when it has become too expensive, has decided not to fund it.

The Republican solution for everything is to lower taxes. Their hero Ronald Reagan did that and they revere him to this day. Ronald Reagan lowered taxes and began a massive re-armament of the military that resulted in a substantial growth in the deficits. Ronald Reagan’s major complaint against Jimmy Carter was his massive $64 billion deficit. In response to Republican criticism, Carter had already reduced taxes. Reagan once in office massively reduced them while never committing to any politically difficult cuts, such as in medicare or social security. And Reagan did this during a period of high interest rates, leveraging the country at a high cost for future generations.

Fast forward to the teabag led revolt against common sense. These people are from my generation and I know where they got their political compass. They understand half of Reagan’s legacy, but not the other half. People prone to make heroes out of people are very capable of selective memory and self-delusion. Mike Lee, Jason Chaffetz and their ilk live in this delusional world of hero adulation, and have lost touch with reality. They created a crisis that didn’t need to be out of shear misreading of history and what it means today.

Running deficits is not the best idea, certainly of the magnitude we are running currently. However, these deficits are being made during an economic downturn where interest rates are low. Tax cuts for the wealthiest Americans which have been preserved in the fatally flawed compromise that even right-wing nutjobs like Mike Lee voted against left those cuts intact. The Republican reasoning for lower taxes for the wealthy is that they are the ones likely to invest money in our economy. However, capital is mobile. Much of the tax cuts implemented by George W. Bush went to real estate, and to foreign investment, areas that had little lasting impact on our economy. The manufacturing sector of the U.S. economy continues to suffer while we buy cheaply made goods from China. This is the real problem we face. Not some mythical creeping socialism in the paranoid minds of Mike Lee, Glenn Beck and others.

This bad deal didn’t need to be made. Action is needed, but not the actions that are being taken. If the economy turns around, the deficits will shrink. This deal lessens the likelihood that the economy will turn around. And this is the result of right-wing black-mail. To quote James K. Galbraith from Salon “This deal validates the making of real policy under the appearance of extreme threats. That process will not end here. And while Social Security, Medicare and Medicaid escaped in the first round, they are set up to fall in the second. The deal creates a new junta to force those cuts before the end of this year. The process is repellent, cruel, undemocratic, and designed to leave blood on the ground but not on anyone’s hands”. From self-deception, comes self-destruction.

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