Blogs and Stories
Finally Some Straight Talk on the Deficit
L to R: Reuters; AP Photo
After years of evasiveness by the GOP, finally some frank talk about deficits from Obama and even from Hillary in China.
Barack Obama and Hillary Clinton each said something smart about the budget deficit last week. Let’s hope Americans were listening.
While in Beijing, Clinton thanked the Chinese for buying our debt. At first glance, that wouldn’t seem like a very big deal; US officials have been presumably thanking them behind closed doors for years. But Clinton did it publicly, which means that it wasn’t just China’s leaders who heard her, but average Americans as well. That’s important because most Americans still don’t think of China as our bank: the country whose willingness to purchase US Treasury bonds allows us to run up massive deficits without short-term pain. When people in Congress or on TV talk about US policy toward China, they often conveniently ignore that. They propose that we pressure China to improve its human-rights policy, or to get tougher on Iran, or to devalue its currency. What Clinton was telling Americans—in an indirect way—was that we can’t pressure China to do squat. Yes, they need us: We’re a big market for their goods and we’re still a good place to invest. But they can find other places to invest more easily than we can find other investors. It’s better to be a global creditor than a global borrower, as Americans knew back in the 1920s when our investments propped up the economies of World War I-ravaged Europe.
What Clinton was telling Americans—in an indirect way—was that we can’t pressure China to do squat.
That’s not to say America should abandon all efforts to influence Beijing. But Clinton was sending a message that we should be more realistic about what we expect. Or else—if influence over China really matters to us—we should get much more serious about bringing down our national debt. We need to talk more honestly about the way our epidemic of borrowing weakens our power overseas. And in a shrewd way, Clinton did just that.
Barack Obama sent a shrewd message of his own about the deficit last week: He said his administration would cut the projected deficit in half by the end of his first term. Whether he can do that is anyone’s guess: It has everything to do with when the recession ends, and revenue starts flowing back into government coffers. But Obama was wise to make the pledge anyway, for two reasons. First, because if he’s serious about tackling the cost of entitlements—particularly Medicare, which contributes mightily to our long-term deficit—he’s going to have to spend a lot of time convincing people in his own party. Democrats are so used to hearing Republicans try to cut Medicare, Medicaid, and Social Security while at the same time enacting big tax cuts for the rich that many have come to think of the whole topic as a political Trojan horse. If we’re truly going to slow the growth of government health-care spending—which we have to do—it’s probably Democrats who must take the lead, because they won’t conflate cost-reduction with privatization, as George W. Bush did, and because they enjoy more public trust on the issue, and thus won’t be as vulnerable to political attack. With his pledge to cut the deficit last week, Obama laid the groundwork for that effort within his own party.
John Talks Joe
Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.
The Right Dumps Carrie
Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.
Geithner's Stock Plummeting
Jeff Madrick is a contributor to the New York Review of Books and a former economics columnist for the New York Times. He is editor of Challenge Magazine, visiting professor of humanities at Cooper Union, and senior fellow at the New School's Schwartz Center for Economic Policy Analysis. He is the author of Taking America, The End of Affluence (Random House) and The Case for Big Government.
China's Upper Hand
Peter Beinart, senior political writer for The Daily Beast, is a professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation.
The Dems' Smart Abortion Move
Peter Beinart, senior political writer for The Daily Beast, is a professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation.
The Myth of the Wall's Fall
Peter Beinart, senior political writer for The Daily Beast, is a professor of journalism and political science at City University of New York and a senior fellow at the New America Foundation.
Bravo. One of the better articles on this issue.
Now if only someone at The Daily Beast were to do some real investigative reporting on the names and firms responsible for issuing the first mortgage backed securities. This information must be logged somewhere - I challenge you to do some digging! A Pulitzer might result.
One way Obama could reduce the deficit is by cutting some of that other 700 Billion dollar annual bill we have: maintaining the 800 military bases we have around the world.
I am all for fighting terrorism and dictators, but how many million dollar jets do we need? The enemy has seen that they can't beat us in a frontal assault, so they are going guerilla. Like they did in Vietnam, the defeat in which we were supposed to have learned our lesson.
Republicans are for lack of a better word, liars. The yearly budget for all military branches is 700 billion and more. And every time Lockheed Martin makes a bomb, that's a workers paycheck yes, but it's also one more bomb we're going to have to use. Think about how those Fords are piling up now and imagine if every one was meant to kill.
MILITARY INDUSTRIAL CONGRESSIONAL COMPLEX.
This comment has been removed by The Daily Beast's editors.
So thanks for that. extremely nonsensical and rude comment, magic. Especially after such a clear, succinct, awesome article.
winkingchef:
You need to watch "House of Cards" on CNBC. David Faber spells it all out.
* Saturday, March 1, 2009 at 12a ET
* Sunday, March 15, 2009 at 9p ET
Straight talk coming out of Washington, namely the Administration? It may take us Americans some time to get adjusted to this "transparency" thing since I can recall nothing but political double-speak coming out of DC during my lifetime. But, it's an adjustment I am more than happy to have to make.
Keep up the great work, Obama Administration.
The GOP lost the high ground over the last eight years as the party of responsible spending through profligate spending (two wars, the rebuilding of the Gulf and lower Manhattan, prescription entitlements for Medicare recipients and lower marginal tax rates (the latter offered as a stimulus to counteract the collapse of the Internet Boom and the Twin Towers attacks). However, in order to recover the mantle of fiscal responsibility, methinks the Republicans will need to rely on the Administration to restrain Congressional Democrats from entertaining every conceivable sheckel of social spending possible.
The Obama Administration dropped the ball by having Congress craft the so-called "stimulus bill" and will need to provide greater direction in the future lest the Chinese and other investors in Treasurys judge the Governments's policy as being hellbent on debasing the US currency.
Both parties are infected with "spenditis", this will just be more talk. No one is seeing the irony of talking about deficits after passing the largest single spending bill in US history. Perhaps we can now tackle barn doors now that the cows have left.
The big drains in the future are entitlements - Medicare, Social Security, Bush's big prescription plan, and I would assume at some point in the future national healthcare. These all dwarf both the Iraq and Afganistan war and the defense budget. Neither party has the intestinal fortitude to go after entitlements, so it will just be fumbled forward.
If people are excited about "talk", they voted in the right guy. He sure loves to talk.
One of the dumbest articles I have read in a while. The centerpiece of BO's budget is a lie. The only way BO gets to claim that he is cutting the deficit in half is by including Iraq spending in the budget and then cutting it, which was going to happen anyway. So Bush does not count the spending towards the deficit, but BO counts the spending reduction as a cut. Presto! These guys really should be running our banks. Mr. Beinart would be their first depositor, apparently. If you want actual fiscal responsibility, how about not dumping $2.4 trillion down a hole?
Well we didn't really get it straight from Peter Beinart either. The real confusion is caused by comparing dollars without considering inflation and population increase etc. These are called nominal dollars. After corrections are made for inflation etc., they are called "real" dollars.
For example deficits have increased for every president (except for the last 2 years of Clinton's) because of inflation and population increase. Using nominal dollars (remember these are the silly ones) it appears that the National Debt increased by 72% during the last eight years, some people have referred to this as doubleing the debt. Using "real" dollars we can see that the "real" increase was much smaller, on the order of 8%.
Another easier way to make comparisons is by comparing the size of an item to the size of GDP, or as a percentage of GDP.
Another thing that surprises people is the fact that, eventhough Clinton had 2 balanced budgets, the size of the public debt for his 8 years (as a percentage of GDP) is much higher than it is now.
( " We're a big market for - THEIR goods - and we're still a good place to invest. But they can find other places to invest more easily than we can find other investors. " )
Hilarious !
Aren't most of ( "THEIR goods" ) actually ( OUR goods )
. . . as in American factories & products . . . manufactured in China?
Doesn't all this soft dancing around human rights just prove that our government really cares more about the bottom line
than how China treats it's people.
CNBC's Erin Burnett said it all -
"If China starts making toys with NO lead in them, or food that ISN'T poisonous, their cost of production are going to go up, and Wal-Mart prices will go up. China is our greatest friend."
Is that like saying "so what if Americans are poisoned as
long as we're making money?
Remind us never to have Erin Burnett pick out our baby formula, or select our toys.
Let's get real.
Peter Peter Peter where do I start We should thank the Chinese. Isn't that like thanking the credit card companies for taking my money? Shouldn't we be spending less when we can't afford it? I do agree with one thing and that is saving money on the military We should bring all our troops home. We should close all our bases around the world. We have been fooled by this President He's spending way to much and giving us a bigger debt. That's the facts and all the rhetoric is worthless Just like how he campaigned, against NAFTA but goes to Canada and is for it. I am sorry to say this but he is just another typical politician. Full of promises and hot air. Only the fools are swayed
IF we could get serious about True National Defense , er, ah, like actually defending our nation in The Future, we would take most of the Military Budget resources and *massively* build concentrated solar thermal, wind, & geothermal energy *systems* -- sources; the Interstate Transmission System; retrofit every building standing in the USofA. As well as fixing roads and bridges and schools and getting broadband to every inch of the nation.
IF we were foresighted enough to see that this would truly defend The Grandchildren, we could employ gadzillions of folks and change the world at the same daggone time.
We could close most of those bases and bring those soldiers home with a better war to fight. They would still be serving their country but in a way that isn't out of a creaking, lunatic 19th century worldview. The Energy Army.
Bluntly, one of the challenges for any country in all history has always been what to do with The Too Darn Many Young Men no economy can easily soak up. The military (Crusades etc) was a convenient place to park them (&/or 'nobly' eliminate them) at a cost cheaper to a society than prison. We are at a unique vortex where we could park them actually building The Smart Future. And fix The Economy & those pesky deficits in the bargain. Smart. What a novel idea.
(Yes, concentrated solar thermal could already do utility scale if we built it out today. Google it.)
Ummm...Obama is "doing his part" by getting us even more indebted to the Chinese? Or at least begging them to buy more treasuries to finance Obama's debt (they said no)? And how is running trillion $$$ deficits, then hopefully, if everything goes well and we raise taxes, in a few years the deficit will be 'only' $533 billion being fiscally responsible? Come on now.
Thank you.
As a first time user, your comment has been submitted for review. It can take anywhere from a few hours to a day or two for your comment to be reviewed, depending on the time of week and the volume of comments we receive.
Please log in to leave comments.