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Sometime during the past 32 years many prominent Democrats forgot the lessons of the Great Depression, or never learned them, and, instead, absorbed the lessons of Hooverism, in part from Ronald Reagan who believed in the religion of free market capitalism, and also in the derivative idea that real economic growth always come from the private sector, but also, in part, I think, from Democratic opposition to Reagan’s deficit’s, which they opposed, not simply because they were incurred to give tax cuts to the rich, but also, on the old-time religious grounds that balanced budgets and surpluses should be the norm for a virtuous America.<\/font><\/font><\/p>\n Bill Clinton reinforced the old-time religion when his restrained public spending coupled with good economic fortune in the private sector, led to higher Federal revenues, and to surpluses in the last years of his Administration. Democrats since have taken these surpluses as points of pride, and proof that it is the Democratic Party that is fiscally responsible, and not the Republicans, who shortly after the accession of George W. Bush returned to deficit spending. In taking pride in Clinton’s \u201cachievement,\u201d Democrats have conveniently ignored that the very end of the Clinton Administration was marked by a recession following the collapse of the Internet bubble of 1999. They make no connection between the appearance of that recession, and the Administration’s insistence on managing for budget surpluses rather than for economic development and job growth.<\/font><\/font><\/p>\n The Obama Administration, of course, hasn’t been able to avoid deficit spending, since the mess left it by the Bush Administration, the sharply declining tax revenues caused by the Great Recession, and the need to prevent a full-fledged collapse into a depression has forced it to engage in deficit spending in order to save the financial system and to provide some economic stimulus. Yet in the course of this deficit spending, a concern about deficit neutrality and making progress toward a balanced budget has affected its actions. In the stimulus area, a program that may have been only 50% of what was necessary to end the Great recession has been passed and is being implemented. Why didn’t the Administration push for, as some economists were proposing, a $1.6 Trillion stimulus with a much larger jobs component?<\/font><\/font><\/p>\n One reason, of course, is the greater political difficulty involved in passing that. But at the time of consideration of the stimulus package, the President’s popularity was overwhelming. Insistence on the larger package coupled with appeals over the heads of Congress to the people would probably have won the day, especially if the President had been willing to ask Harry Reid to use the nuclear option to pass such an expanded package. A second reason, for not passing an expanded package, however, may well have been the President’s belief that recovery really ought to come from the private sector, and that the role of Government ought to be limited to preventing a fall into depression and creating the underlying consitions for growth, but not extended into actually providing jobs programs to people who are suffering because they are unemployed.<\/em><\/strong> In setting his priorities this way, I think the President was reflecting a belief that deficit spending ought to be restricted to coping with or preventing the occurrence of problems that threaten our system in a fundamental way as a depression would have, but that it should not be used to cope with problems that, however, severe, do not rise to that level of basic threat to our system.<\/font><\/font><\/p>\n The President’s concern about deficit spending is certainly reflected in his framing of health care reform. Evidently, he doesn’t think that the 45,000 annual deaths, the more than one million annual bankruptcies, and the hundreds of thousands of annual foreclosures due to lack of health insurance, represent a sufficiently serious crisis to justify legislating a reform using deficit spending.<\/em><\/strong> And his desire to avoid deficit spending is certainly a factor in his seeking a reform that would not involve total Federal health care expenditures of more than $900 Billion over 10 years, and that would need only small tax increases to fund it. In turn, this desire for limited expenditures and deficit neutrality explains his desire to take Medicare for All off the table as a serious policy alternative. I think the president just didn’t want to cope with a policy that would have required a minimum of $1.7 Trillion in Federal expenditures each year, even if such a policy would have saved $800 Billion in health expenditures annually to be applied to other purposes in the private economy.<\/font><\/font><\/p>\n Most recently, we see President Obama’s concern about deficit financing expressed in reply to the latest calls for a jobs program. At the jobs summit he stated:<\/a><\/font><\/font><\/p>\n “. . . While I believe that Government has a critical role in creating the conditions for economic growth, ultimately, true economic recovery is only going to come from the private sector. We don’t have enough public dollars to fill the hole of private dollars that was created as a consequence of the crisis.”<\/font><\/font><\/em><\/strong><\/p>\n<\/blockquote>\n This statement reflects two beliefs which I believe are incredibly destructive to the economy and the United States in the circumstances we face now and will face in the future. First, where is it written that Government’s role is limited to creating the conditions for economic growth, but can’t have a direct part in the recovery itself? Surely, that is not the history of the New Deal. It is not the history of the recovery in World War II. It is not the history of great public projects like the Tennessee Valley Authority. This isn’t pragmatism, or a reaffirmation of the \u201ccan do\u201d spirit. What it is, is a statement of Obama’s ideology and its constraints, his economic religion that he shares with Ronald Reagan, and unfortunately, with too much of today’s Democratic Party, which has joined the Republicans in starving the public sector for years. It is the ideology that says that real wealth and real economic advance come only from the private sector, and that Government programs can’t create real wealth and lasting value. In this time of trouble and the crying need for re-invention of our economy, we can’t afford these constraints or this religious belief. We have to open ourselves to the idea that there are certain things we need now like providing jobs for people to help to reconstruct our economic infrastructure and to begin the reconstruction of our energy industries that, in the absence of private sector willingness to do them have to be done by us acting collectively through our Government.<\/font><\/font><\/p>\n And the need to put people to work and to create real value in the economy where the private sector will not for the moment do so, brings us to the President’s belief that there aren’t \u201cenough public dollars to fill the hole of private dollars . . . \u201c This belief is flat out false. The president shouldn’t believe it, and we shouldn’t believe him when he says it. This is a typical assumption of the \u201cold-time religion\u201d that Obama seems still to adhere to and that is hurting us now, since it is an important rationalization for him refusing to put through a comprehensive and powerful jobs program that would restore consumption power and end the Great Recession in short order.<\/font><\/font><\/p>\n The belief that the Government has limited dollars is one of a number of false beliefs that pervade both politics and Government in relation to economic issues. Warren Mosler<\/a>, following John Kenneth Galbraith, has called some of these beliefs \u201cinnocent frauds\u201d and, in addition, has called them deadly. Nor is Mosler the only one to use similar language to characterize beliefs like the President’s. During the 1990s Rick Boettger<\/a>, characterized both the deficit and national debt as myths and lies. Robert Eisner, a former President of the American Economic Association wrote The Great Deficit Scares<\/a><\/em>, and The Misunderstood Economy<\/a><\/em>, two books in which he wrote of myths surrounding the deficit. Also, Francis X. Cavanaugh<\/a><\/em>, a former high-level Treasury official gives a lucid account of five myths about the national debt and then advocates for spending control to keep politicians responsible, but not to prevent expenditures directed at solving severe national problems.<\/font><\/font><\/p>\n In these and other works, everyone agrees that the idea that Government Dollars are in any way limited for any particular purpose we have in mind is false. American currency is the creation of the US Government. It can create (i.e. print, or electronically allocate using computers) as many dollars as it wants or needs to. If dollars are limited it is due to our choice. It is because we, ourselves, adopt rules that limit the number of dollars that the Government can spend. As Mosler briefly puts it:<\/font><\/font><\/p>\n “Government spending is NOT operationally limited, or in any way constrained by taxing or borrowing.”<\/font><\/font><\/strong><\/em><\/p>\n<\/blockquote>\n And he goes on:<\/font><\/font><\/p>\n “But as long as government continues to believe this first of 7 deadly innocent frauds- that they need to get money from taxing or borrowing in order to spend, they will continue to support policy that constrains output and employment, and prevents us from achieving what are otherwise readily available economic outcomes.”<\/font><\/font><\/em><\/strong><\/p>\n<\/blockquote>\n In short, the President believes that Federal dollars for a jobs program necessary to end The Great Recession are limited. He can only believe that because he believes that the Federal Government has to either tax or borrow to get those dollars. This belief is false, and it can’t provide either a rationale or an excuse for not funding as large-scale a jobs program as Americans need to go back to work. <\/font><\/font><\/p>\n Finally, the posture that The Government can only do so much to lower unemployment in this recession, because its dollars are limited is not the kind of language we ought to be hearing from a Democratic President. It is the kind of language we are used to hearing from Mike Spence, or Judd Gregg, or Mitch McConnell, or some other Neanderthal, and not from a Democratic progressive who believes in the usefulness of Government in addressing serious social and economic problems. <\/font><\/font><\/p>\n More than that, it is the posture of Herbert Hoover, a really fine man, with more than a few progressive instincts, who hamstrung himself into accepting the slide into depression by his commitment to free market ideology and his belief that he had to wait for the private economy to prove that \u201cprosperity is just around the corner.\u201d President Obama often sounds like Hoover, asking those without a job, with much reduced or no income, with a shredded, and with severely damaged futures to be patient while his earlier inadequate stimulus package does its work, and while he does very little to alleviate their difficulties. Can anyone imagine FDR acting the way Obama is acting now? Or would he, in contrast, be devising measure after measure to create jobs and prime the economy, and bullying the Congress to pass those measures? He was a real leader of a nation in trouble. Why is Obama failing to follow his example, and following Hoover’s instead?<\/font><\/font><\/p>\n\n
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