The President’s Re-election (More Discussion III)

In my December 4 blog post, I set forth the views of Albert Nekimken PhD of Vienna, Virginia. I urge my readers to go to that post here and re-read Albert’s comments.

My response follows:

Please read the following with care and refer to the source materials as shown by URLs. The theology of the Left is no better than that of the Right. No, I don't mean that. It is far better, but I prefer to be fact-based and realistic, and not live in any world that ignores unpleasant facts.

                       

Thanks for your input. I may be wrong, but the way I see our divergence, is that he (i.e. Roger Streit) and Paul Krugman seem to believe that in a depression or even a recession, deficits are good and the larger the deficit the better.

                       

Also that no changes should be made in entitlements, certainly not any that reduce spending. That seems to be the position of the Left, and I draw a distinction between the Left, which seems to be almost as disinterested in facts and evidence as the Right and Liberals, like myself, who are fact and evidence oriented. There is a reason why I spend so much of my time doing research in an effort to ascertain relevant facts. Krugman increasingly comes across as a shrill polemicist.

                       

I believe that deficits matter, and I reject equally the claim made by our former Vice-President Dick Cheney, that "Reagan proved deficits don't matter," and those made by Krugman. (That does not mean that I favor a balanced budget) Interestingly enough one should note that Cheney is being consistent, even now arguing against what Krugman calls "the deficit scolds.” Or as the Washington Post reported: 

"Cheney, said lawmakers in the closed-door meetings, urged Republicans to continue high levels of military spending, warning them to resist automatic cuts that were put in place in last summer’s bipartisan budget deal. He offered not a word about how to fix the enormous budget deficits and soaring federal debt....The vice president talked only about the pros of appropriate investments in defense,” reported Sen. Bob Corker (R-Tenn.), who worried that lawmakers might respond to such advice by abandoning attempts to restrain spending." 

                       

But I digress. Your point is well taken. Krugman has said in so many ways that he wants to inflate our way out of the recession. He ignores history on this point and pays no attention to the terrible time we had when having let loose inflation through excessive deficit spending in the Johnson Administration, that led not only to inflation, but what came to be known as stagflation. Carter and his appointment of Paul Volker to be chair of the Fed, broke the back of that by raising interest rates, stopping the inflation, but increasing the recession, which cost Carter the election, and I have to admit that Reagan got us out of that malaise, by deficit spending. The funny thing is that if we look at the history of deficit spending, it is the Republicans who consistently do it, and the Democrats who are always balancing. 

                       

See the tables below:

(Please double click on either image to enlarge.)

The addition of the Presidents in office at the time of each deficit as a % of GDP are mine.

Please note that while during the war years '41-'45 Roosevelt (and his Congress) increased our debt as a % of GDP by a whopping 67.1%, the Truman Administration substantially reduced it by a whopping 46%, Eisenhower also reduced it, but by only 16.2% Kennedy/Johnson equaled that reducing it by 16.6% Nixon/Ford basically kept it flat, Carter resumed the reduction in deficit spending by 3.3% and then came the new Republicans screaming for balanced budgets, but under Reagan the deficit was increased  by 20.6%, further increased by H.W. Bush by 13%, decreased by the Clinton Administration by 9.7% (while having a booming economy by the way) only to have G.W. Bush increase the deficit by 25.3%, which despite all the noise is a hell of a lot less than Obama's 1st term of increasing the deficit by 10.3% of GDP in the face of a recession that is close to a depression.

If we add up all Republican and Democratic records on the deficit, exempting Roosevelt's war time spending, we get Republican - increase in deficit spending of 76.1% as against Democratic Administration decrease in deficit spending of 71.4%, and since the beginning of the Reagan era Republican increase in deficit spending of 58.9% as against Democratic increase in deficit spending of .60% even counting Obama's recession stimulus.

Which shows how easily the public is fooled into believing that Republicans are the party of balanced budgets, while the Democrats are the wild spenders. See the Pew Research Center poll which shows that the budget deficit was of the greatest concern to 69% of voters as of January 2012 and those: "... favor Romney over Obama by a 52% to 42% margin." Would they have had these views if they knew the facts? Those views are informed long before the campaign begins.

Which brings me once again to Krugman's contention that we can inflate our way out of recession by deficit spending. First as I have said before this runs the risk of run-away inflation and even stagflation as history informs us.

In addition Krugman and those who are likeminded show their inconsistency, because if the crux of getting out of the recession is deficit spending, then logically they ought to be satisfied to increase the deficit by any means, including extending all the Bush tax cuts and increase defense spending. That would have the advantage of being politically viable. But they are against this because they recognize, though they are reluctant to say so, that deficits are not the solution. Redistribution of wealth is. Recessions are caused by many factors, but one that is a primary cause is an imbalance between producers and consumers, as Henry Ford recognized, when he doubled his workers pay and started building the middle class. When producers have more resources than consumers, we get recessions and in a worldwide economy worldwide recessions. When consumers have more capacity to buy than producers to produce, we get inflation. That is a simple creed that I would think a Nobel peace prizewinner in economics, should be expounding, instead of focusing on the merits of unsustainable deficits.

That is the fundamental difference between the views of Krugman/Roger Streit and myself.

In addition Krugman/Streit want no changes in entitlements, while I believe that changes are absolutely necessary, not primarily because of the deficit, but because without changes these programs are not sustainable. As I said in my post "Social Security – An Honest Evaluation":

"But that means that even without any changes full payments of Social Security benefits would be paid to all those who are now 44 years old or older, which is better than the guarantee offered by the Ryan budget by one year, and unlike the Ryan budget benefits at a reduced rate would continue to be paid. 

"However I don’t believe that is good enough. We need to make sufficient changes so that people who are now 24 years old and are paying into the trust fund for the benefit of older generations are guaranteed full benefits. If we don’t do that, these younger generations will see little reason to support the system, and it will be doomed much earlier, simply because young people will insist that they not pay into a system from which they will not draw the full benefits of older generations."

As far as your comment below on this subject is concerned, you have to check the math and the political feasibility. You are right that SS should not be part of the budget deficit negotiations because they are not a cause for the deficit. That is the position of the President. But that doesn't change the fact that whether part of those negotiations, or separate from them, changes have to be made. Your suggestion that "making 90% of all income subject to SS tax withholding contributions," has two problems with it. By itself it will not solve the shortfall. I cannot at this moment give you chapter and verse, but I have researched this in the past and it wouldn't be enough. Secondly, it has to be politically feasible. Republicans will never allow it. So do we accept a stalemate and let SS die, or do we make such reasonable compromises as will save it.

Arguing that we need this or that if we don't have the money to pay for it is futile.

I believe that the solution I suggested in my post entitled "The President’s re-election (More Discussion)" is the right one: 

"Or we could consider changing it altogether, to kick in after 40 years of work. This would have the advantage that those who start work earlier, usually the under class, could draw earlier than those going to college, who earn more and are more advantaged. The figure for women as of 1940 are 14.7 and for 1990 19.6, so at the risk of being sexist, it might make sense to have an older eligibility age for women than for men." 

On second thought 45 years would be more realistic.

You say: As for rising life expectancies, where do you find evidence for this myth? This is downright insulting!!! You should know better than to ask me a question like that!!!! I don't deal in myths. I attack them No matter where they come from. I source everything. I wish you and others would look at my sources. I got my figures from the Social Security Administration. I am afraid that you like most others, Right or Left, reject unpleasant facts.

Now to Medicare you talk about the, "potential for legislating lower prices from vendors in the healthcare industry" but you don't say who these vendors are. Are you talking about physicians and hospitals? I can't comment without knowing who these vendors are.

As for your suggestion that we should "establish a national health service that provides services directly" while a fine thing to dream about, there is no point in belaboring that which is not politically viable.

We must live in the real world. We must focus on that which is possible, not "The Impossible Dream.” Ditto for the rest of your comments. The President is working on the possible. Obama Care, which has already extended the life of Medicare by seven years (See here and here) has the capacity through efficiencies in the delivery of health care, to further reduce the cost, particularly through the Medicare Independent Payment Advisory Board, 

As for your comments on the Defense budget, are you advocating that we let the sequester stand, even though it would decimate a whole range of vital services? I once again refer you to the excellent New York Times article entitled: "White House Details Potential Effects If Automatic Budget Cuts Go Through"  (You really have to read my source material.)

In our dreams we win great victories. In the real world we compromise when we must, rather than watching as everything we value goes down the drain but we have the satisfaction of remaining pure.