Stimulate Debt Awareness

Posted by By at 5 February, at 22 : 55 PM Print

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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