Whose Debt is it, Anyway?

Paul Krugman's recent column on the Greek economic mess contained a detail that I'd either never realized or had forgotten. In discussing the extent of Greece's national debt, Krugman notes that the U.S. "in 1946 ... had a federal debt equal to 122 percent of G.D.P." That high level of debt, he notes, did not doom the American economy. Due to steady economic growth, the debt "as a percentage of G.D.P. continued to fall in the decades that followed, hitting a low of 33 percent in 1981."

That latter date struck me--the post-World War II historic low of the American national debt was reached in the first year of the Reagan administration. Over the next decade, it would rise to 55.9 percent, and reached a height around 70 percent in the middle of the Clinton administration, before declining in the final Clinton years as the budget ran a yearly surplus and debt was retired.

Why is this significant? Because it puts today's ostensible outrage over the national debt into some historical perspective. While conservative Tea Party supporters would have us believe that liberalism is the problem, the debt numbers give the lie to that claim. The national debt went down throughout the post war period, during the years when the New Deal coalition still dominated American politics--despite the continuation and expansion of the New Deal, despite JFK's New Frontier and LBJ's Great Society (which significantly increased the role of the federal government), despite almost uninterrupted Democratic control of Congress. Through all of that, the national debt went down as a percentage of G.D.P. It only increased with the advent of the Age of Reagan. Since Reagan, every president has overseen an increase in the national debt as a percentage of G.D.P., with one exception--Bill Clinton. Yes, that's right right. The only Democratic president of the Age of Reagan is also the only president who oversaw the reduction of the national debt.

That might be something to keep in mind, as today's G.O.P. continues to peddle the idea that tax cuts will solve all of our problems.

The "Stimulus Did Nothing" Canard

If there is one thing Republicans agree on these days, it is that the stimulus bill "did nothing." The newest Republican phenom, Scott Brown, asked to have his swearing in hastened so that he could oppose any further economic stimulus. “The last stimulus bill did not create one new job,” Brown confidently said.

This claim is absurd on the face of it.

Oh, it is easy for people like Sean Hannity to hammer away at the fact that the Obama administration claimed that the stimulus would keep the unemployment rate from reaching 8%, and last month it was 10%. Therefore, they claim, it did nothing--unemployment is higher, so no jobs were created.

On the surface, you can see the appeal of the claim. But it won't withstand even a moment's thought. Jobs being saved, or created, is not inconsistent with the unemployment rate going up. It's the equivalent of saying that the rescue efforts in Haiti have saved no lives because the death count keeps going up.

Yes, they were wrong about what the unemployment rate would be. But if that is the standard Republicans want to use, then they have some explaining to do.

Let's take the Reagan tax cuts enacted in August 1981. At that time, the unemployment rate was 7.4%. Despite the tax cut, the unemployment rate continued to rise, reaching a height of 10.8% in December 1982. It did not decline to below the August 1981 level until the fall of 1984, over three years after the passage of the bill. Would today's GOP say that this means the Reagan tax cuts did nothing, that they "did not create one new job”?

Or look at George W. Bush. In January 2001, Dick Armey predicted that passing "a pro-growth tax cut ... could help avert a recession." Despite getting the tax cut passed in June 2001, which Bush predicted would stimulate the economy, the unemployment rate rose from 4.2% in January 2001 and peaked at 6.3% in June 2003. Yet we were told repeatedly that the tax cuts worked, even though the unemployment rate continued to rise for two years after the cuts were enacted. When even ONE Republican says that this fact means the Bush tax cuts did "nothing," I'll start taking this line of attack on Obama seriously.

The unemployment rate would be higher without the stimulus. To pretend that it did "nothing" is absurd substantively because it is demonstrably false, but if the objective is to deny Obama any credit for partisan purposes, well then there is a certain twisted logic to the claim--one perfectly consistent with the scorched earth political strategy of the GOP.

One last blatant contradiction. If the stimulus package did nothing, then it would seem tax cuts are totally ineffective and produce nothing, since about $200 billion of it was tax cuts. I won't hold my breath waiting for Republicans to admit that.