Signaling that a deal on the debt draws near, Wall Street rocketed up today, with the Dow Jones Industrial Average gaining 323 points, despite differences between Democrats and Republicans. President Barack Obama offered the GOP an honest dialogue on the debt and future spending once the GOP-controlled House gave him a “clean” long-term spending bill. Before palpable fear over a possible default seeped into the White House, Obama talked tough, refusing to play the GOP’s games, attempting to delay his March 21, 2010 Patient Protection and Affordable Care Act. Newly minted Republican elected officials in the House believe their oath of office involved stopping Obamacare. They forgot that beyond egregious partisanship they swore their allegiance to the United States, promising to preserve and defend the Constitution, especially promoting the mighty U.S. economy.
Without any substance in economic theory or practice, the GOP decided that the long historic national debt—dating back to the Revolutionary War—must be shrunk. Economists, including Federal Reserve Board Chairman Ben S. Bernanke, has told the GOP repeatedly that the national debt or the federal budget deficit aren’t a problem with long-term U.S. solvency as long as the nation’s Gross Domestic Product continues to rise. During the waning days of the George W. Bush presidency, the same voices that today call for draconic cuts in the federal budget, were no where to find. They tolerated a budget deficit roughly twice as big as today. When Obama took office Jan. 20, 2009, the deficit soared to $1.4 trillion. Today’s revised number by the Congressional Budget Office stands at $607 billion, the smallest fraction of the GDP since Clinton balanced budgets in the late ‘90s.
As budget deficits shrunk over the last four years, the GOP ramped up their calls for more budget cuts. They routinely blame Obama for massive deficits, when they’re, in fact, less than 50% of Bush’s. GOP demands for managing the national debt or dealing with federal budget deficits would be that unpalatable if they had any sound economics theory behind their demands. Adding nearly 5 million jobs since the economy bottomed out in March 2010, the Treasury has expanded the tax base, causing budget deficits to shrink. GOP attempts through the mandatory “sequester” to slash government spending and now shutdown government has been discouraged by the Fed and practically every reputable economist. No reputable economist believes that less government spending is good for the economy. Shutting down the government has cost the economy billions in lost revenue.
Dealing with an angry GOP mob, Obama walks a dangerous tightrope trying to keep the government open under threats of default. Republican—especially the Tea Party—fanaticism over the budget and debt-ceiling has stamped into mainstream voters a real fear of voting for Republicans. While there’s plenty of GOP gerrymandered districts around the country, it’s going to be far more difficult for Republicans to run successfully with mainstream voters in national elections. Getting a mega-dose of bad publicity over the budget and debt ceiling stalemate, the GOP has difficulty explaining why they oppose Obamacarem, still seeking to slash the budget. Their explanations run counter to most economists, all in agreement that government spending has improved the nation’s sluggish jobs market. It’s difficult placating Wall Street and foreign investors when threatening to default the nation.
House Speaker John Boehner insists what the GOP wants more budget cuts for good for the economy. His prescription flies in the face of advice by the nation’s most respected economists. “We’re looking for a structure that puts us on a path to get a budget, to take care of the debt,” said House Majority Whip Kevin McCarthy (R-Calif.), talking as if the economy hasn’t improved under Obama. McCarthy knows the economy crashed in 2007-08 under GOP policies because of excessive defense spending, especially on foreign wars. McCarthy and GOP leadership know that the debt increased because the Fed had to print trillions of dollars to keep the economy afloat. GOP officials also know that debt and deficits aren’t real problems, unless they occupy too big a fraction of GDP. As Wall Street rallied and the economy added jobs, deficits have shrunk to the lowest level since Clinton.
Staring an unruly GOP mob in the face, Obama must find some way of buying time until he can figure out how to re-start the government and increase the nation’s debt ceiling. Boehner and his Tea Party friends seek to shrink the federal establishment, primarily by de-funding Obamacare. If the GOP would listen to the Fed, keep Wall Street happy and re-start the government, the economy would continue to grow, taking care of deficits and the national debt. After watching the economy crash under Bush, the public didn’t elect Obama to two terms to follow the GOP formula for success. Demonizing the national debt and budget deficits doesn’t tell the true story of an improving economy under Obama. With Wall Street rising 100%, the economy adding 5 million jobs and the deficit cut in two since Barack was sworn in, the GOP shouldn’t be calling the shots.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.