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Posted by on Apr 21, 2012 in Economy, Politics | 13 comments


O’Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. “You know, Paul, Reagan proved deficits don’t matter,” he said, according to excerpts. Cheney continued: “We won the midterms (congressional elections). This is our due.” A month later, Cheney told the Treasury secretary he was fired.

Of course with the Democrats in power deficits once again matter.  Please note the deficit increase under Lord Ronnie of Reagan.  Even with four more years Obama is going to have a hell of a time catching up  with Reagan and Bush the Second.

Chart via David Atkins at Digby’s place.

Cross posted at Newshoggers

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Copyright 2012 The Moderate Voice
  • JeffP

    Ron Suskind’s book “The Price of Loyalty” laid it out pretty starkly. Paul O’Neill seemed like a pretty good guy. Didn’t let Washington or that administration change his definition of “Conservative.” He’s a brand of conservative I could believe in again.

  • zephyr

    I really get tired of today’s republicans being referred to as “conservative” since they are anything but. That said, democrats aren’t exactly “liberal” anymore either. The chart is a reminder of how much democrats end up having to play cleanup after republican administrations.

  • The_Ohioan

    “The Triumph of Politics: Why the Reagan Revolution Failed” by David Stockman

    How and why the Reagan administration almost tripled the national debt from THE insider’s view. ECON 101 must read.

  • RP

    Once again figures don’t lie but liars can figure.

    The chart above shows a very informative data set that one can use to create the impression that the republicans create debt at a much greater rate than the current administration.

    But looking at the information in different terms one can determine that Reagans deficts to GDP averaged over his term in office was 4.2%. Bush 41’s deficts to GDP was 3.9% and Bush 43’s deficits to GDP was 9.9%. Obama has not completed his term, but his is averaging right at W’s, between 9% and 10%.

    Clinton’s term in office never did return a surplus as that myth is circulated. The closest he came to a balanced budget was 17.8 billion deficit in 2000. He was also helped by the huge increase in tax revenues from the Dot.Com bubble as well as the deregulation of the banking industry in the early 90’s.

    (Many different websites show these numbers)

    So lets present data that does not present a position that supports one side or the other. Present the data so people can actually understand what is happening. Bush 41 and Obama have run up the debt from a little over 5 trillion to 15 trillion with the 2020 projections to be well over 20 trillion

    Maybe if we discussed ways to eliminate the deficts and not place blame, then something could get done. A tax on the 1%’ers is a good start. Takes the annual deficit from 1.5 trillion to 1.45 trillion. Now lets find the other 1.45 trillion. And thats $1,450,000,000,000 we overspend!

  • zephyr

    Many different websites support Ron’s graph as well, including Wikipedia and the Dept of Treasury. In any case (all shell game apologism aside) the hypocrisy on the right is stupifying – at least it would be to a citizenry that was paying attention and/or not in the thrall of tribalism. Reagan was seen as pretty much of a buffoon by much of America during his presidency (yes, I remember) and GWB as an incompetent fool. The record shows why those views were correct (mythology and selective amnesia notwithstanding).

  • adelinesdad

    I’m not nearly as concerned about our current debt, and the historical deficits that created it, as I am about our projected future debt. Which party will be president when those deficits are realized has not yet been decided, but is mostly irrelevant anyway since it is the decisions being, or not being made, now that can help us the most in the future.

    Dick Cheney was wrong–end of discussion, as far as I’m concerned. Now, what are we going to do now?

  • DaveA

    IMHO the biggest answer is we are quite likely to continue virtually increasing taxes by inflating our currency at the highest rate the populace and financial sector can stand.

    As an example, let us say inflation goes up at flat 5% a year based on today’s dollar value. Simplified, that means in 10 years that is an effective 33% tax on all the money you have earned in the past. Why? Because the money you have saved is now worth 66% as much. From a policy perspective the golden key is that it also shrinks the amount of debt the US owns by 1/3 as we write our debt in our own currency. If our currency is worth 2/3 as much in the future, all that old debt can be paid down with cheaper future dollars.

    I don’t doubt we will also debate and probably increase taxes as well as cut services. But both of those probably pail in comparison to the ‘inflation tax’ we currently seem to be embracing.

    Probably the biggest issue you or I see with this, is that wages and conservative investments are not keeping up with this inflation rate. So, it becomes one more nail we are hammering into the middle class coffin.

  • cjjack

    “Maybe if we discussed ways to eliminate the deficts and not place blame, then something could get done.”

    Well RP, that sounds great, but there are two things which stand in the way of your plan:

    1. Politicians cannot operate without placing blame.

    2. The current crop of Congress beasts cannot get anything done.

    Maybe I’m extremely jaded and cynical, but it seems that at the moment a compromise in Congress is about to come together, both sides realize that they’re about to agree with their mortal enemies on something and they promptly scuttle the whole shebang.

  • zephyr

    Apparently cooperation and genuine cross-party efforts to address fiscal problems are seen as signs of weakness and are therefore taboo. Congress might as well be run by gangs of chimpanzees for all the good they do.

  • RP

    Zephyr..Please refrain from attending any locations where chimpanzees are present. You have offended a complete species of animal!

  • merkin

    It is a good thing that gridlock in Congress is preventing us from decreasing the annual deficit. Reducing spending or increasing taxes now would hurt the recovery from the worse recession since the great depression.

    Everyone here complains that politicians are always wrong and then you parrot their ideas and talking points. Do you want to be wrong on purpose or is it unintentional?

    The Federal government is the one entity that can’t go bankrupt, it can create money out of thin air. It will, as someone pointed out create inflation, but that is only a consideration in good times, not when you are in a recession.

    The current annual deficit is high because the recession has reduced tax receipts, not because Bush or Obama are evil. Sane people would saying what can we do to prevent more financial crisises like the one that triggered the recession that caused the deficit, not what can we do to make the impact of the recent one worse.

  • DaveA

    Hmm, I would disagree that inflation is not a concern during recession or otherwise. Inflation is an effective tax increase, and if you have not noticed its effects check your next cost of a fill up or grocery store trip.

    It is also pretty darn destructive to a good percentage of the retiree’s looking for guaranteed income on their (declining in value) savings, especially when coupled with a policy of artificially low interest rates.

    If it has ‘good points’ it is that it is harming pretty much everyone regardless of class. And there is not (yet) much of an unending political debate about who gets the shaft worse, rich or poor, etc. I would also say that it helps exports, except that a good chunk of the world is also inflating fast as they can too, so the later is kind of a wash.

    The down side is of course we can buy less stuff, or it has to be cheaper (made elsewhere), or we delay a purchase / do without. If 3/4 of our economy is driven by the consumer, then this would seem to be not so good for any long term recovery.

  • Zzzzz

    Despite the stimulus and quantitative easing, inflation has remained LOW.

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