Remember when we had a surplus?

[ElfBane]

How Republicans Screwed the Pooch

Republicans say they want to save the country from Obama’s reckless spending. But as Paul Begala argues, it’s the GOP’s policies that have driven the nation into the ground.

Jul 30, 2011 9:19 PM EDT

There it sits, lonely and forlorn on my shelf. A leather-bound copy of the 1999 Budget of the United States of America. A gift from President Clinton to the folks on his team, it was the first balanced budget in decades.

But it wasn't supposed to be the last. Indeed, experts projected surpluses as far as the eye could see. $5.7 trillion in surpluses, to be exact. The surpluses were so strong that deep into the future—in 2009—the entire national debt was going to be zero. For the first time since Andy Jackson was president, the United States of America would not owe a dime.

It didn't quite work out that way, did it? As Washington seems paralyzed, our economy stagnates, and America's full faith and credit is on the brink, it is useful to recall how we got here. This was not an act of nature. There was no unforeseen earthquake, no tsunami, no hurricane that wiped out our surplus. It was instead a Republican House, a Republican Senate, and a Republican president who squandered the surplus. In full possession of the federal government for the first time since Eisenhower, the GOP—with, to be fair, some help from some very foolish Democrats—systematically dismantled the economic and fiscal policies that produced the strongest economy and largest budget surplus in our history.
Specifically, they did four things: cut taxes (with a heavy tilt toward the rich), waged two wars on the national credit card (one of which was against a country that had nothing to do with 9/11 and posed no serious threat to America), passed a prescription drug benefit with no pay-for (the first entitlement in American history without a revenue source), and deregulated Wall Street (which helped turn the American economy into a casino and touched off the Great Recession).

I recap all that not to further depress you, Dear Reader. But it is striking how absent that history has been from the coverage of our current crisis. I can understand why the GOP doesn't want to remind folks of how they screwed the pooch. Indeed, they have a competing myth—that Washington went on a spending binge; radical young President Barack Obama went crazy with the national credit card. That, of course, is nonsense. But too few Democrats—and almost no media commentators—have countered the mendacious right-wing storyline.

Just as bad as ignoring how we got here, we risk missing the story of precisely where the GOP wants to take us. In the coverage of the game (Will Boehner find the votes? Will the Tea Party really drive us off a cliff? Will Eric Cantor lead a revolt?) we sometimes neglect the substance of the proposals. Just what kind of country do the Republicans seek to build? Instead of seeing it as a bargaining chip, perhaps we should treat the GOP proposal as a serious governing document.

What the GOP seeks is a banana republic: a toxic blend of right-wing populism, anti-intellectualism, debt defaults, and an end to the ladder of economic opportunity.
Bob Greenstein, the widely respected president of the nonpartisan Center on Budget and Policy Priorities, has done just that. His conclusion:
The Boehner-GOP plan is "tantamount to a form of ‘class warfare.’ If enacted, it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history."

Think about that. As the economy teeters on the precipice of a double-dip recession, as millions of Americans search in vain for a job, as tens of millions of homeowners are underwater, as poverty soars and the middle class is hammered, the Speaker of the House is pushing a proposal that—let me repeat Greenstein's analysis—“could well produce the greatest increase in poverty and hardship in modern U.S. history.” Deep cuts in every domestic priority—from education for disabled children to food safety to homeland security to clean air and water. Followed by painful cuts in Social Security, Medicare, and Medicaid. But not a dollar in new revenue. Not one corporate loophole closed, not one billionaire asked to pay one penny in higher taxes.

Oh, and if they don't get their way they will cripple the Treasury's ability to pay the debt—the debt, I hasten to add, that their policies created.

It has become a trope of the right to accuse Obama and the Democrats of trying to remake America in the image of Europe. That, of course, is silly as well as insulting to the people who gave us the Magna Carta and the Enlightenment, not to mention spaghetti. But in whose image would the radical Republicans remake us? Certainly not in the image of the Founding Fathers. The Republicans are already seeking to make Swiss cheese out of Mr. Madison's masterpiece, littering the Constitution with amendments on budgeting, the line-item veto, gay marriage, abortion, school prayer, restricting birth-right citizenship, and more.

Seems to me the GOP seeks a banana republic: a toxic blend of right-wing populism, anti-intellectualism, debt defaults, and an end to the ladder of economic opportunity. They would divide us into a few Haves and a lot of Have-Nots. And they would slowly crush the heart of progressive America—the rising middle class created by Democratic economic policies of education and empowerment. All while preserving, protecting, and defending a tiny oligarchy of millionaires and billionaires.

The right wing should ditch the tricorn hats and replace them with mirrored sunglasses. They truly are Banana Republicans.



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Paul Begala is a Newsweek/Daily Beast columnist, a CNN contributor, an affiliated professor of public policy at Georgetown, and a senior adviser to Priorities USA Action, a progressive PAC.

For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.


This article was edited by ElfBane to remove graphics.

[Timber Loftis]

A couple of factors need more fleshing out to avoid a one-sided view. This fleshing will make things more complex and not allow all fault to be pointed at the 2000-2008 Republican governance, though most of it still can.

First, there is no mention of the dot.com bubble. When Bush took office, he had a crisis on his hands. San Francisco was becoming a ghost town. Dot.com yuppies were selling everything they owned to go BASE jumping with what remaining money they had left.

Now, this crisis, this bubble, was one of dozens caused by Wall Street, which keeps finding ways to create bubbles with or without regulation -- though admittedly the abuses are much more dastardly and outright when there is deregulation.

But, who can we owe deregulation to? The first big step came in the 1997 time frame. Mortgage-backed securities had been birthed, and they were propping up what Alan Greenspan knew was a bubble back then. Each quarter, Greenspan reported on the bubble, but shrugged and repeatedly said housing starts looked good. This was all happening because bad loans were being bundled and then insured and then sold as securities. If you know the definition of those 3 words ("bundled," "insured," and "securities"), then that alone should make your skin crawl.

Nevertheless, there was a brave crusader: Brooksley Born had been appointed to head up the Commodities Futures Trading Commission, or CFTC, in 1994. She pointed out that these mortgage-backed securities were futures. They were futures in the housing market just as assuredly as the corn futures were futures. Both were bets on the future health of a market for a commodity. In fact, this was true of all, ALL, the financial derivative markets. And, they were unregulated, fell under the umbrella of the CFTC and ought be regulated to avoid disaster for precisely the same reason corn futures are regulated.

Greenspan blanched.
Rubin and Summers (treasury secretaries) gasped.
After some thought, Levitt (SEC head) groaned.

The four got together and said "Psssshawww, you trippin' girlfriend." In fact Greenspan specifically told Born that the difference in their views was that she believed you could and should regulate financial fraud, and he believed the market would magically protect us from it. (I added "magically," but we have established I am not above a rude characterization or two.)

Clinton... capitulated. Or didn't know enough to say anything. Whatever, same effect.

10 years and one stupid president (who loved to suckle the teat of the rich and richly reward them in return) later... and we have meltdown. Who knew? Born knew. And Clinton didn't help her, or do anything, really. A little known fact is that Clinton loved the bankers, too, in fact nearly as much as he love philandering (but probably not as much, but then again look at his dorky (then) and hellish (now) wife).

From the Wiki on Born (http://en.wikipedia.org/wiki/Brooksley_Born)(and note that it is consistent with what is reported in the Stanford magazine distributed to alumns, which I have seen, and that Born was not only an alumnus but she was also Stanford's first female Law Review editor):

Born was appointed to the CFTC on April 15, 1994 by President Bill Clinton. Due to litigation against Bankers Trust Company by Procter and Gamble and other corporate clients, Born and her team at the CFTC sought comments on the regulation of derivatives,[3] a first step in the process of writing CFTC regulations to supplement the existing regulations of the Federal Reserve System, the OCC, and the National Association of Insurance Commissioners. Born was particularly concerned about swaps, financial instruments that are traded over the counter between banks, insurance companies or other funds or companies, and thus have no transparency except to the two counterparties and the counterparties' regulators, if any. CFTC regulation was strenuously opposed by Federal Reserve chairman Alan Greenspan, and by Treasury Secretaries Robert Rubin and Lawrence Summers.[4] On May 7, 1998, former SEC Chairman Arthur Levitt joined Rubin and Greenspan in objecting to the issuance of the CFTC’s concept release. Their response dismissed Born's analysis and focused on the hypothetical possibility that CFTC regulation of swaps and other OTC derivative instruments could create a "legal uncertainty" regarding such financial instruments, hypothetically reducing the value of the instruments. They argued that the imposition of regulatory costs would "stifle financial innovation" and encourage financial capital to transfer its transactions offshore.[8] The disagreement between Born and the Executive Office's top economic policy advisors has been described not only as a classic Washington turf war,[6] but also a war of ideologies,[9] insofar as it is possible to argue that Born's actions were consistent with Keynesian and neoclassical economics while Greenspan, Rubin, Levitt, and Summers consistently espoused Austrian, neoliberal, and neoconservative laissez faire policies. The derivatives market continued to grow nearly throughout both terms of George W. Bush's administration. On September 15, 2008, the bankruptcy of Lehman Brothers forced a broad recognition of a Late-2000s financial crisis. As Lehman Brothers' failure temporarily reduced financial capital's confidence, a number of newspaper articles and television programs suggested that the failure's possible causes included the conflict between the CFTC and the other regulators.[4][10] Born declined to publicly comment on the unfolding 2008 crisis until March 2009, when she said: "The market grew so enormously, with so little oversight and regulation, that it made the financial crisis much deeper and more pervasive than it otherwise would have been."[6] She also lamented the influence of Wall Street lobbyists on the process and the refusal of regulators to discuss even modest reforms.[6]

Also, please note that the ability of the CFTC to regulate these futures still does not exist. Born's recommended regulation has NEVER been put into effect, and as of this date, her warnings still have not found their way into law. No, and I mean ZERO, regulation of financial derivatives has occurred, despite the bank failures, the bailout, and all the fallout. Still, to this day, Wall Street has basically ZERO regulation on this issue, so we can expect the same crisis to occur again, and again, and again, all while Wall Street continued through the crisis, and continues to this day, to give itself record bonuses. It's gone beyond the ridiculous and into the insane, and no one can justify it, yet it still goes on and on.

[Azred]

Both Republicans and Democrats have been driving the economy into the ditch for the last, oh, 40 years. They are both at fault.

It isn't just financial derivatives, you know. There are certain types of options that shouldn't be allowed, either, especially when I am trying to sell something I do not own but I will buy it and give it to you at a future date. Srsly?

[John D Harris]

WOW!!!!! that was rather acurate... who are you and what have you done with TL???? Yeap the everybody has a right to own a house policies and the failure of President Bush and the republican house and Senate to stop them certaintly didn't help it, just it piled on. The new Frank-Dod banking regulation haven't done squat, and aren't going to do squat either.

When they started alowing the dirivatives, futures crap the stockmarket ceased to be an indicator of the economy and how well companies were preforming. Tow weeks ago the stockmarket had a run up and every single bit of news coming out on the economy was bad.... Stocks are nolonger priced by what they are worth but are now priced by what somebody thinks they can make off selling them. It's all a bunch of happy horse manure. We are living in a preception is reality bubble right now and sooner or later reality will brust it wide open. I was hoping they wouldn't make a deal, but I knew better.... Hale I never have any good luck.

As miss Betty once said Hold on we're in for a bumpy ride.

[John D Harris]

Hey Elf how many countries in the world have birthright citizenship to illegal im-mee-grants children?

[ElfBane]

Originally Posted by John D Harris Hey Elf how many countries in the world have birthright citizenship to illegal im-mee-grants children?

Don't know... why? And what makes you think I favor birthright citizenship?

[John D Harris]

Originally Posted by ElfBane Don't know... why? And what makes you think I favor birthright citizenship?

just askin', cause that is one of the points the writer of the article makes to show how evil the republicans am.

Anyways the USA is the only one of the developed world that gives citizenship to babies for just being born in the USA. Oh and by the way this conservative Republican thinks that is how it should be, that's one of the things that makes the USA the greatest country on the face of the Earth, we ain't like the rest of the world.... you can do the search for where I wrote it durring a discussion with TL.

[machinehead]

33, among them Canada.

The following are among the nations repealing Birthright Citizenship in recent years:
Australia (2007)
New Zealand (2005)
Ireland (2005)
France (1993)
India (1987)
Malta (1989)
UK (1983)
Portugal (1981)

[ElfBane]

Birthright citizenship is no big deal to me. AAMOF I don't really care too much about the immigration issue, as long as peeps realize that if ya get rid of 'em... expect groceries to go up. I think the E-Verify plan might be a good idea, but that sends some folks on the Right into conniptions because they think it's some sort of national ID card. Well, I got news for those folks, the national ID card is on the way... in some form or another.

What do you think of E-Verify?

[Timber Loftis]

Originally Posted by John D Harris WOW!!!!! that was rather acurate... who are you and what have you done with TL????

In the long run (we're all dead, right?), I try to be as Fair and Balanced[TM] as I can. I just want things done right. But, thanks, I guess, for recognizing that I know my history.

everybody has a right to own a house policies

This was a big pie-in-the-sky dream of the Repugs, much moreso than it was owned by anyone else. Fannie and Fredie may have had Democrud ties, but the idea of home ownership for everyone was a Repug ideal, and they proliferated it with aplomb.

When they started alowing the dirivatives, futures crap the stockmarket ceased to be an indicator of the economy and how well companies were preforming.

Despite your usual misspellings, this is accurate.

Stocks are nolonger priced by what they are worth but are now priced by what somebody thinks they can make off selling them.

This has always been the case, and is a central problem with the SEC.

We are living in a preception is reality bubble right now and sooner or later reality will brust it wide open.

I'd have to search to find what is the current bubble. Following the housing bubble, we had a big gas bubble. I'd have to search a bit to find out what the current bubble is. Wall Street is always selling us a bubble... following housing it was gas. How do we know what the current bubble is? Well, look to where Wall Street is telling the big pension fund managers where to put their money at the moment -- that, my friend, is the bubble.

I was hoping they wouldn't make a deal

Me too. I wanted a Gov't shutdown. HALE, it didn't hurt us in the 90's, and really can't hurt us now. I wanted to see Gov't workers furloughed.

As miss Betty once said Hold on we're in for a bumpy ride.

Sadly, indeed we are.