Friday, November 28, 2014

Deficits Don’t Matter

“Deficits Don’t Matter” sounds like some weak liberal defense of our out of control deficit spending.  As I have shown in my book – and what is clear to any student of recent American History – it was Reagan who was the first President to submit huge deficit budgets without a real war to justify them.  While one might argue that he did have a war to justify them – the Cold War – and that that struggle was brought to a successful conclusion in 1989 (under the Presidency of George H W Bush) partly because of the defense build-up and spending, there was no compelling reason not to collect the taxes to pay for that spending (and thereby avoid unnecessarily large deficits) as we were not digging our way out of a depression.

However, the quote belongs to Dick Cheney – Vice President under Obama’s predecessor, George W Bush – and here is the “full” quote: “You know, Paul, Reagan proved that deficits don't matter. We won the mid-term elections, this is our due.”  He was speaking to Paul O’Neill, the Treasury Secretary at the time (within days of becoming a former Treasury Secretary).  While it was primarily a political statement, its contempt for “balanced budgets” and “fiscal responsibility” shines through nonetheless.  It was 2004 when Cheney said it, and the Debt was on its way toward doubling what George W Bush had inherited from Bill Clinton, exploding from $5.8 trillion to $11.9 trillion.

The reason for this partisan rant is this: it is good to have at least one political party be the party of fiscal responsibility.  It is not so good when they ignore their own cardinal principles when they control the government.  But it is not so good when they remember their principles just in time to attack relentlessly a successor President of the other party who has the job of reining in a recession that was their gift to the American people.