by Eric J. Epstein
“Stimulus” is a short-term shot-in-the-arm that causes a response. Government is a long-term proposition. The immediate results of the American Recovery and Reinvestment Act (“ARRA”) are mixed. The long term recipe for this nation’s economic health requires personal and societal discipline.
On the bright side of the stimulus equation the Market is up, December retail sales increased by 2.8%, the manufacturing sector grew for the last five months of 2009, and factory employment showed improvement.
Roads were paved, bridges built, and jobs created. And most die-in-the-wool conservative politicians scarfed up stimulus money to back fill or finance state and local debt just like their liberal brethren.
However, the structural deficit that is modern American government will not be cured by the ARRA, arrested by gimmicks or reversed by Fox television. Stimulus dough will not reinvent government.
The malaise is far from rectified. Maybe unemployment has crested at 10.1%, but it will take years for employment to rebound to pre-recession levels. Local, state, and federal deficit mountains have not been capped. We simply switched debt from a state to federal pocket.
This crisis is not about debating the Keynesian model. Administrations from FDR to Reagan to George W. have employed Keynesian injections to refuel the economy.
Our woes extend to the twin challenges of retooling an aging infrastructure and paying down deficits. We need to stabilize spending, address debt, and recognize that conservatives and liberals got us into this mess. As we move from stimulus shock to debt awareness mode, we will also require consistency and accountability.
None of the doomsday projections blanketing the air and audio waves provide a historical context. Many folks seem to have forgotten the role of the Bush Administration during their daily rants, and affix blame solely on the shoulders of Mr. Obama’s 12 month administration.
Mr. Bush actually inherited a balanced budget before going on a spending spree. Former Treasury Secretary Paul O’Neill attempted to send a pre-recession flare. He warned Mr. Bush that the growing budget deficit was poison for the economy. Dick Cheney quashed Mr. O’Neill, and lectured the secretary on the finer points of priorities: ”You know, Paul, Reagan proved deficits don’t matter. We won the midterms (congressional elections). This is our due.”
Where was the tea party when Mr. Cheney announced – on behalf ot the Republican Party – that debt didn’t matter?
O’Neill was fired in December 2002, but as Chris Edwards of the Cato Institute noted last month, the price we are paying for political economics goes beyond liberal bashing:
In total Bush increased spending by an average of 4.9% (after adjusting for inflation) per year, the highest by any president since Johnson. Excluding interest payments, the increase under Bush was 5.6% per year in real terms, nearly matching LBJ. And – for those who think Bush only increased spending on wars – non-interest, non-defense spending increased 5.4% annually in real dollars, which is the highest since Nixon.
It’s bad enough when consumers live off of debt. It’s worse when conservative vice presidents argue government debt doesn’t matter. As history has clearly demonstrated, both parties are to blame for the mess we’re in.
I’ve been bemoaning budget deficits my entire career, and proudly stand behind the bipartisan efforts of the Concord Coalition.
Ok, so stimulus loans patched a hole in a wooden tire. What to do we next? We educate and preach with missionary zeal that debt matters. Debt awareness can not be a fad. It has to be a public awareness campaign. We all need to pledge to be balanced budget hawks
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