The assassination of Osama Bin Laden takes many of us back to events happening 10 years ago. I was reminded of another aspect of the prior decade by Lori Montgomery’s May 1, 2011 Washington Post article “Running in the red: How the U.S., on the road to surplus, detoured to massive debt ”http://www.washingtonpost.com/business/economy/running-in-the-red-how-the-us-on-the-road-to-surplus-detoured-to-massive-debt/2011/04/28/AFFU7rNF_story.html
She starts out with a few facts showing how “the nation’s unnerving descent into debt began a decade ago with a choice, not a crisis.” Economics is full of facts mixed with one hopes plausible projections. Back in January 2001 we had a balanced budget and the Congressional Budget Office forecast ever-larger annual surpluses indefinitely with more than a $2 trillion surplus by 2011. Now we expect to owe more than $10 trillion to outside investors by the end of this year. In her article Montgomery documents how political leaders wasted the opportunity by taxes, waging 2 wars with borrowed funds and disregarding warnings. We lived dangerously avoiding reality and have even arrived at trying times. And part of this is a distorted view of what happened. A majority of Americans have been convinced that the fault lays in wasteful or unnecessary federal programs for the nation’s budget problems. The contextual facts are otherwise. True, the Bush administration pushed through 2 unfunded wars which cost to date over a trillion dollars. But these were avoidable and has more impact than routine increases in defense and domestic spending. So let’s avoid such wars. According to a new analysis of CBO data, routine defense and domestic account over the last 1o years accounted for only about 15 percent of our financial deterioration. We could have absorbed this without a crisis. So where did the large deficit come from? The article points to the folly on the revenue side and the consequences of lax fiscal policy:
“erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That’s nearly half of the $12.7 trillion swing from projected surpluses to real debt. Federal tax collections now stand at their lowest level as a percentage of the economy in 60 years.”
The article goes on to factually document the types of erroneous thinking that got us into the mess. One is that tax cuts could stimulate the economy etc. Sound familiar? Well the cuts didn’t work. There was also the argument that less oversight would allow the capitalist system to work more efficiently. Business Columnist Steven Pearlstein blew the whistle on this back on 2007 as he apportioned blame for the rapidly advancing financial crisis. He noted the ineptitude and lack of leadership of Wall Street and the nation's financial regulators. They were silent on the coming collapse, although as we know many positioned themselves to either take advantage of the Big Short or at least protect themselves by cashing out. In Pearlstein's view government intervention was inevitable, essential, and an act of real leadership. Yet now many ignore the facts and blame government for the collapse.
Pearlstein argues that Wall Street's top executives showed little, if any, leadership throughout the crisis which "attests to their moral and political bankruptcy." Yet they seemed to largely escaped blame and their role is not a big part of the budget debate.
When I think of the country we live in now and the halting conversations about our problems I think of Peter Weir's 1982 movie, The Year of Living Dangerously. There we are treated to a Casablanca-like movie updated for modern political intrigue and fabrication. Instead of a world war we have daily rumors of coups by left or right wing extremists. Bureaucratic corruption is routine while the bulk of people are slowly starving to death. Into this comes a naive reporter in pursuit of a big scoop. Can he afford to tell the truth and get the facts out? To do so risks the lives of his newsreel cameraman, photographer and source. Maybe it is better to be quiet, play along and enjoy the good life that 1st world privilege affords. That’s the type of quiet we experience running up to the collapse in 2007-2008. Now there seems a quiet about the real issues as people compete to slash the federal budget without handling the revenue side. We aren’t exactly in The Year of Living Dangerously world, but the past 10 years have been a period of overlooking problems and misrepresenting things. This year may be more of the same. Even Thomas Gradgrind, the notorious headmaster in Dickens's novel Hard Times might be appalled. His bottom line was money, the pursuit of money and profit. He represents too one dimensional a person focused on isolated facts and things that can be hacked into numbers, but his words still warn us:
"Now, what I want is, Facts. Teach these boys and girls nothing but Facts. Facts alone are wanted in life. Plant nothing else, and root out everything else. You can only form the minds of reasoning animals upon Facts: nothing else will ever be of any service to them. This is the principle on which I bring up my own children, and this is the principle on which I bring up these children. Stick to Facts, sir!"'