A New Republican Borrowing Beast is Born!
I have been waiting since the November election to see how Republican Borrowing Beast scams play out. That fearsome beast has now, despite campaign deficit reduction talk, once again been unleashed. We will continue to borrow money to reward our richest billionaires with new billions in tax breaks. Scrooge’s clerk, Bob Cratchit, and his impoverished family will continue to suffer; Tiny Tim may lose his health insurance; and the miserable Scrooge will continue to speculate, hoard money and foreclose.
Thursday, December 16, 2010 Congress finally approved, and the next day the President signed, an $858 billion extension of all Bush 2001 and 2003 tax cuts for two years and created additional new tax breaks as well. One fourth of all income tax reductions go to the richest one percent of taxpayers. They are also rewarded with a $5 million inheritance tax exemption and reduced rates. Democrats were coerced into voting this monstrous giveaway to the rich as ransom for extending middle-class tax reductions and unemployment benefits for thirteen months. See a graphic illustration of the cost of this plan here.
In my August 15, 2010 blog, “Paper Money Makes Voters Happy,” I quoted Canby Balderston, then a governor of the Federal Reserve Board, summing up a speech at a Wharton School Alumni luncheon during the Nixon Administration:
“We will soon run out of that nothing with which to make no down payment.”
I then explained: “Despite the warnings of true conservatives like Canby Balderston and Paul Volker, former Chairman of the Federal Reserve Board, Republican politicians, beginning with President Nixon, could not resist the temptation to buy elections with ever-expanding extensions of credit.”
After some details about how this works, I quoted a moving description in the Atlanta Journal-Constitution by a long unemployed, decorated war veteran of how it feels trying to live on the “nothing” of which Dean Balderston spoke.
August 30 I wrote a sequel, “Taming the Borrowing Beast,” in which I pointed out: “The last time the United States operated on balanced budgets, that is, spending no more money than collectable in taxes, was during the Democratic Administration of President Clinton. In its final annual quarters, that administration’s budgets yielded a surplus; that is, the federal government collected more in taxes than it spent.
“According to the still dominant business cycle theory of British economist Lord John Maynard Keynes (1883-1946), governments should take in more money than they spend during good times so that in hard times they may ease the pain by spending more than they take in. . . .
“Continuing in the Nixon tradition, President George W. Bush, at the first sign of declining economic prospects in 2001, applied a big dose of Nixon voter happiness balm with risky inflationary tax cuts to the wealthy, and, as if that was not enough, began a war in Afghanistan. In 2003, came more tax cuts to the wealthy and the Iraq war.
“Tax cuts plus war spending are wildly inflationary. They induce voter euphoria for a while—a seemingly endless feast of dollars garnished with patriotic fervor are delicious—but eventually the happiness bubble breaks, and we are at the mercy of a grouchy Borrowing Beast.
“That beast leaves us, in the words of Alan Greenspan, with choices that are no longer between “the good and the better,” but between “the bad and worse.”
How do we, an electorate addicted to an illusory prosperity from a political financing fix, tame our Borrowing Beast?
“First, as in the ‘twelve steps’ method, we have to face the fact of our addiction.
For more on this topic: “Hatching a Brand New Beast.”
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