With the reported jobless rate exceeding 9 percent and the real rate considerably higher, with a struggling economy, with the stock market wildly erratic, with real property values continuing to plummet, with many European nations threatened with bankruptcy, with the federal government deficit spending and debt leading America in the same direction and with vicious partisanship between Democrats and Republicans in Congress, anxious Americans are looking to Washington for leadership and solutions.
For many the first stop on this search for answers is the president. To date he has largely relied on Keynesian principles that in adverse economic conditions government should pump money into the economy to stimulate growth. History has not treated this theory with much kindness.
In 1933 in the depths of a depression President Roosevelt initiated what for those times was unprecedented federal spending to create jobs and to restore the economy. No real recovery occurred until the advent of World War II. TGI columnist Gene Lyons argues in a recent column that President George W. Bush cut taxes, entered two off budget wars and created unfunded Medicare drug benefits thereby greatly increasing the federal debt during his tenure. Under Keynesian logic these actions should have produced a strong improvement in 2008 instead of the struggling economy that President Obama has claimed is the basis for his incurring over 5 trillion dollar deficits in his first almost three years in office. Has the Obama spending regime worked? Not really. The joblessness now is higher and the economy is no better than when he entered the presidency. Government spending failed in Europe also. The case for Keynesian measures seems unprovable.
The great majority of Americans are concerned that our federal government needs to borrow nearly 40 cents for each dollar it spends and that the federal debt has soared. They watch with angst as Republicans in Congress seek spending cuts and a balanced budget amendment to our constitution while Congressional Democrats offer no real plan beyond increased taxation for the wealthy.
It is a splendid time for presidential leadership. But as yet it is not apparent. In the discussions last month about increasing the debt ceiling while he was a participant, the actual deal was made by Congressional leaders with considerable bipartisan dissatisfaction with the result. Although it is generally recognized that the bulk of any program to reduce the federal deficit must be from a reduction in spending, President Obama’s exhortations have been mainly limited to calling for raising taxes for those having incomes over $250,000 per year which would, if adopted, only produce a very small portion of the deficit reduction required to achieve a break-even. Mr. Obama has failed to produce any specific plan to cut expenditures beyond speaking generally about eliminating wasteful programs.
Recently, alarmed by the amount of the federal deficit and the apparent inability of our federal government to offer a meaningful program to deal with it, the rating agency Standard and Poors for the first time ever reduced its rating for federal debt securities from triple A to AA+. In a presidential sound bite Mr. Obama following the downgrade airily declared that we remain a triple A country. But he missed the point. Standard and Poors did not downgrade the country, what it did was say that the debt of the government of the country contained risks that triple A obligations should not have.
The federal debt level now exceeds $14 trillion. Unless further action is taken it is on a path to reach $21 trillion in ten years. At that level preservation of national solvency would be in serious jeopardy. How did we get here? Politicians on both sides of the aisle find it is easier to say yes than to say no to constituents who are seeking measures to provide more safety from terrorism, a more effective educational process, a greener planet and many other worthy proposals. But this permissiveness has resulted in our becoming ever deeper in debt.
The discipline that would have been provided by a balanced budget requirement or constitutional amendment is missing. So in all but three of the past seventy years federal spending has exceeded revenue.
What is the course that can be expected now? Is there an urgency that suggests or requires an immediate action? Congressional leaders don’t seem to think so as they have happily recessed the congressional session for five or six weeks. The president doesn’t appear to want to interrupt his Martha’s Vineyard vacation or his campaigning to initiate any action, although he says he has a plan about jobs. Both the leaders and the president seem content to rely on the provisions in the debt ceiling bill to establish a congressional commission to recommend steps toward deficit reduction and a fall vote on a constitutional amendment to balance the budget.
Unless resolved, the deficit may well be the defining issue in the 2012 elections. The position of the tea party movement which has been largely adopted by Republicans is quite clear. But most of us find the vagueness of our president on the deficit issue perplexing. A demonstration of his leadership requires a clear expression of his program.
Kaua‘i is a small and remote part of our nation, but we are irretrievable bound by its actions. It is a time for everyone to give serious attention to these matters which will affect so greatly our future and the well being of our children and grandchildren.
• Walter Lewis is a resident of Princeville and writes a biweekly column for The Garden Island.