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Friday, July 22, 2011

"Get Your History Straight" on Fiscal Responsibility

I see these claims frequently as well, i.e. that Keynesian economics doesn't work because any surplus is always used for new spending:

Debt and Forgetfulness, by Paul Krugman: I keep seeing comments along the lines of “Keynesianism doesn’t work, because liberals keep running deficits even when times are good, and never pay debt down.”
Guys, how about looking at recent history (pdf)?
Between 1993 and 2001, federal debt held by the public fell from 49.2 percent of GDP to 32.5 percent of GDP. What stopped the paydown of debt wasn’t liberal big spending; it was demands from conservatives that the surplus be used to cut taxes. George Bush said that a surplus means that the government is collecting too much money; Alan Greenspan warned that we were paying off our debt too fast.
Oh, and I was very much against those tax cuts, arguing that we should pay down the debt to prepare for future needs. As a reward, I now get accused of inconsistency, for saying that deficits were bad under Bush but good now.
Anyway, get your history straight before making claims about who’s fiscally responsible.

Democrats aren't the ones who can't keep their hands off of surpluses. The problem isn't that surpluses will be spent, the problem is that they will be given away as tax cuts instead of being used to pay down the debt. That's the lesson Bush taught us. Republicans have no interest in using tax cuts to pay down the debt, their goal is to lower taxes on the well-to-do based upon a false promise the tax cuts will somehow trickle down. But rising inequality, the lack of strong job creation througout the Bush years, and economic growth driven by bubbles rather than fundamentals show how hollow the excuses for high-end tax cuts turned out to be.

    Posted by on Friday, July 22, 2011 at 11:34 AM in Budget Deficit, Economics, Politics | Permalink  Comments (46)


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