Remember, during the Bush administration, our certainty that the next president, of whichever party, would have his hands tied by debt? And that this was a deliberate Bush policy? That not just some but any domestic spending would become impossible? Health, education, and welfare chucked out the window by Reaganomics?
Hey, we were right. By way of proof, David Sanger in an economic analysis in today's Times, offers two crucial numbers.
The first is the projected deficit in the coming year, nearly 11 percent of the country’s entire economic output. That is not unprecedented: During the Civil War, World War I and World War II, the United States ran soaring deficits, but usually with the expectation that they would come back down once peace was restored and war spending abated.But the second number, buried deeper in the budget’s projections, is the one that really commands attention: By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5 percent of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water.
For Mr. Obama and his successors, the effect of those projections is clear: Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors... NYT
According to Sanger's analysis, "his budget draws a picture of a nation that like many American homeowners simply cannot get above water."
The fallout from all this isn't entirely bad. At least there are no ifs, ands, or buts in the budget figures: we have to get out of Afghanistan. And the Times, for one, puts the responsibility for the mess squarely on George W. Bush's shoulders. Not that the blame will be fairly place by voters.
At least one prominent economist -- James Galbraith -- responds to the numbers with some reassurances: the "gloomy forecasts" have been wrong in the past and may well be wrong this time. Bill Clinton's first term economic projections became that administration's sizeable surplus.
“Much may depend on whether we put in place the financial reforms that can rebuild a functional financial system,” Mr. Galbraith said, to finance growth in the private sector — the kind of growth that ultimately saved Mr. Clinton from his own deficit projections.
His greatest hope, Mr. Galbraith said, was Stein’s law, named for Herbert Stein, chairman of the Council of Economic Advisers under Presidents Richard M. Nixon and Gerald R. Ford.
Stein’s law has been recited in many different versions. But all have a common theme: If a trend cannot continue, it will stop.
Democrats are left with the political fallout of Republican spending, as expected. Sanger points out that Republicans have been mute about the source of the deficit. Politically, the Obama administration and Congressional Democrats' flirtation with bipartisanship has cost them dearly: it has allowed much of the country to assign responsibility for the country's financial problems to the Obama administration.
More on this screwy "bipartisanship" and its costs later.
And there's little need to point out that these budget projections push health care reform right up to the top of the list. Maybe now is the time to begin working on the defense budget with our little icepicks.
