Thursday, May 22, 2003
DO DEFICITS MATTER?: Andrew Sullivan tries to use Greenspan's testimony yesterday to attack the wisdom of the President's tax cuts:

GREENSPAN'S WARNING: While the president and his party put another huge hole in this country's future fiscal solvency, Alan Greenspan, that notorious leftist, testified in Congress yesterday. Here's how the Financial Times put it:

Mr Greenspan also expressed concern about the effect of plans for further tax cuts and increases in government spending. He warned "deficits do matter" and expressed dismay at what he characterised as a breakdown in budget discipline in Washington. He reminded lawmakers the US government was facing a "significant" budget problem as the "baby boom" population ages and draws on more healthcare and retirement benefits. "I'd like to see that addressed more seriously than it is," he said. "I must say the silence is deafening."

Worth repeating that: deficits do matter.

First off, the President and his party are not putting a huge hole in the country's future fiscal solvency. Sullivan has slipped into classic Hoover economic logic. Long-term fiscal solvency comes from economic growth, not from short-term balanced budgets.

Does that mean deficits don't matter? Of course not, deficits do matter. But it is shortsighted to pursue deficit reduction irrespective of the economic condition of the patient. Put another way, given our current economic situation which is better for the long-term health of the economy, deficits at 2%-3% of GDP for the next couple of years and higher GDP growth or much smaller deficits with lower GDP growth? Anyone who thinks we need less GDP growth today doesn't understand the state of the current post-bubble economy.

The bottom line is the economy needs stimulus. That stimulus, as far as the federal government is concerned, can come from increased spending or by giving money back to the American people in the form of tax cuts. Economic history shows that the private sector is going to allocate and use that money far more efficiently than the federal government. In other words we are going to get more bang for the buck from an economic stimulus that works through the private sector versus the same dollar amount of stimulus that comes in the form of increased government spending.

Sullivan continues in his argument against the Bush tax cut to castigate Bruce Bartlett:

Then you read pieces like Bruce Bartlett's at National Review Online. Money quote:

Voinovich and Snowe are responsible for the $350 billion cap. For some reason, they decided that this was the biggest tax cut we can afford even though it represents a trivial sum over 10 years in an economy that will generate well more than $100 trillion over this period. Chafee is simply a Democrat in all but party registration. McCain, however, is a conservative from a conservative state. He said there should not be any tax cut as long as the nation was at war. Yet he continues to oppose even a $350 billion tax cut despite the end of war.

So the war is now over? Surprising to hear that from National Review. But look at the assumption in Bartlett's piece: that it's absurd for a conservative in a conservative state to actually worry about the government balancing its books! The bottom line is that the U.S. government is going to go seriously broke in a few years because of demographic pressure and entitlement growth. Yet the current administration is merrily adding to the national debt by not one but two big tax cuts, while pushing spending to heights unseen since LBJ opened the spigots. I'm sorry but we saw the consequences of that kind of combination in the 1980s and it took a decade to bring the budget back to balance. The fact that the Democrats are no better is not an argument. It makes Bush's negligence even worse.

Worrying about balancing the nation's books is fine as long as in the process of balancing the books you don't kill the economy. And I'm a little confused by just what consequences Sullivan is referring to by 'that combination in the 1980's.' Reagan's deregulation and tax cuts (coupled with the FED's war on inflation) set the foundation for the great bull market of the 1980's and the 1990's. Maybe I'm missing it, but I just don't see all those negative consequences. Interest rates declined all through the '80's and '90's, economic growth was solid, unemployment dropped and guess what happened to all those nasty deficits, we grew out of them just like Reagan told us we would.

The time to have attacked our structural spending problems related to entitlements and demographics was in the late nineties when surplus tax revenues (from increased growth, not higher tax rates) were pouring into the federal coffers. However, President Clinton had little interest in leading and doing anything that might at all be unpopular so nothing was done. (The Republican Congress was not much better.) So we had a big party in the late nineties and Bush is left to deal with the clean up.

Do we have long-term problems related to demographics and entitlement spending? Yes we do. But now is not the time to attack this problem and that is the key difference the Voinovichs, Snowes and Sullivans don't seem to get. Our number one priority today has to be the maintenance of growth in this economy. For without growth this country and economy is going to be in big trouble. The ability to deal effectively with the long-term problems Voinovich, Snowe and Sullivan are correctly worried about will in turn be significantly degraded.

Interest rates continue to plunge to modern-day lows, Europe teeters on the edge of a deflationary recession, Japan teeters on the edge of a deflationary depression, yet serious people in this country are debating whether its wise to run deficits at 2-3% of GDP. Do they understand the consequences of not providing stimulus to the economy at this critical time? Thankfully the President and most in his party do get it and do understand that we need more tax cuts, not less. That we need more growth, not less.

If you want to criticize the President's tax plan, criticize it for having too little stimulus too soon. But harping on the deficit and suggesting we need to be more focussed on balancing the budget given the current economic and financial condition in the world today is a proscription for disaster. J. McIntyre 1:19 pm

Tuesday, May 20 2003
AL-QAEDA MEMBERSHIP: About halfway through this ominously-titled Washington Post story on Al-Qaeda you run smack into an enlightening fact:

"The Saudi official said there were at least three al Qaeda cells with about 50 hard-core operatives in the kingdom before the bombings. He acknowledged that there was a much wider circle of sympathizers, and U.S. officials broadly agreed with his analysis.

"We don't believe there are tens of thousands of active al Qaeda members here, but we believe the al Qaeda presence is more than a single cell or two cells," a senior U.S. official told reporters today."

Fifty hard-core operatives. Does this number strike anybody else as mind-numbingly low? We're talking about bin Laden's home turf, a country of 23 million people where clerics publicly spew anti-American invective daily and the government has more or less looked the other way for years.

Eighteen months after 9/11 and more than a year after dismantling the Taliban, you'd think al-Qaeda's membership rolls in Saudi Arabia would be higher. Weren't we told that aggressive American efforts to fight terrorism around the world would create "a 1,000 new bin Ladens?"

ROH MOO-HYUN, S. KOREAN NEOCON: Encouraging dispatch from Reuters detailing S. Korea's tough stance with the North over the nuke issue.

Roh developing a bit of public spine with Pyongyang couldn't possibly have anything to do with his meetings in Washington last week with Bush, Cheney, and Rumsfeld, could it?

THE POT & THE KETTLE: Jaw-dropping hypocrisy alert in Ron Fournier's article on the resignation of Ari Fleischer yesterday:

"I think he was the right person for the job and for this president," said Joe Lockhart, former White House spokesman for Democratic President Bill Clinton. "The president wanted somebody who was loyal, who was disciplined, someone who needed to keep a secret. I think he was an articulate spokesman in a difficult situation, working for a president who demanded secrecy beyond what was really called for."

Talk about your Freudian projection...

ILLINOIS SENATE UPDATE: Jack Ryan is quickly emerging as the front-runner for the GOP nomination in the race to replace Peter Fitzgerald. Last Saturday at the Chicago Conservative Conference he handily defeated other possible rivals in a straw poll.

This morning Eric Zorn serves up a flattering profile in the Chicago Tribune (Read a transcript of Zorn's full interview with Ryan here). I've met Ryan a number of times and I have to concur with Zorn: he's the real deal.

But it's still a long way out and there is plenty of intrigue to come. Like this, for example: the Chicago Sun-Times reports this morning that the Fitzgerald camp has been urging RTA Board Chairman Thomas McCracken Jr. to join the race. McCracken finished second to Ryan in the straw poll and with the help of Fitzgerald's organization will mount a serious challenge if he chooses to run. Businessman Andrew McKenna also lurks as a legitimate competitor for the nomination and is favored by some of the serious GOP power brokers in the state.

Meanwhile, on the Democrats' side, the Teamster's Union wasted no time in getting behind Comptroller Dan Hynes. This looks like a well-orchestrated attempt by the Chicago machine to try and scare off any serious competition to Hynes by potential up-and-comers like Barack Obama. - T. Bevan 7:51 am

Monday, May 19 2003
MORE AND MORE BLAIR: Sheesh. I haven't seen such a deluge of commentary on one subject since 9/11. Not even the War in Iraq produced this much chatter. But I guess this is what happens when our narcissistic media culture gets hold of a topic that combines two issues they are totally infatuated with: diversity and themselves.

The wagon-circling on the left is proceeding at a furious pace - especially by black journalists eager to try and extract race from the equation that produced the Blair catastrophe. Yesterday, it was Michel Martin and Leonard Pitts, Jr. Today it's Bob Herbert - again.

Two quick observations. First, the anger and frustration of African-American journalists is completely understandable. They don't want to be associated with or allow Jayson Blair's own immoral and deceitful behavior to stigmatize them or other African-Americans. But no one in their right mind believes that Jayson Blair lied because he was black.

Second, African-American journalists are quick to defend diversity and affirmative action by pointing out that there are any number of white "schmoozers, snoozers and high-powered losers" (to quote Bob Herbert) in newsrooms whose behavior avoids scrutiny. But going around pointing out all of the white miscreants inhabiting newsrooms around the country deflects the central issue of the Blair scandal, it doesn't diffuse it: was Jayson Blair's rapid rise at The Times, despite a lengthy record of sloppiness, enhanced by the fact he was black and was he held to a different standard?

Neither Pitts nor Herbert choose to address this question. Here is how Pitts handles it:

"They offered him [Blair] a slot in an internship program that was being used to help the paper diversify its newsroom. He rose swiftly from there.

It is upon this slim reed that critics have perched claims that diversity has hurt The New York Times. The charge is otherwise unsupported."

Except that Blair's advancement came despite a massive correction rate that would have crippled most reporters. Except that there were direct warnings from Blair's editors that he needed to be sent packing as soon as possible. Except that Howell Raines himself said that Blair's race influenced his decision making.

But here's the real kicker from Pitts:

"I've frequently said that to be a black professional is to be always on probation, everyday expected to prove that you belong. People always ask me what I mean. THIS is what I mean. This, exactly."

Does Pitts feel this way because the entire corporate world is racist and views him (and other blacks) as automatically and inherently inferior to everyone else? Of course not. Pitts doesn't even realize that the reason he feels like he's on probation every day is precisely because of the insidious nature of the affirmative action programs he's defending. The possibility that Pitts is where he is because of affirmative action makes him feel inferior and makes him suspicious of others' thoughts and assumptions about him. Would Pitts feel this way if there was no such thing as affirmative action?

2 REASONS JOHN KERRY WILL NEVER BE PRESIDENT: One. Two.

SANTORUM VULNERABLE?: It's probably a good thing for Rick Santorum he won't be facing voters next year. What he may face in 2006, however, is a challenge from Republican State Treasurer Barbara Hafer, who is considering switching to a Democrat to make the run.

Yes, the scenario is a little farfetched. Still, Santorum's reelection may be less than a cakewalk. If you remember back to late 1999 and early 2000, Santorum was considered extremely vulnerable and was high on the Dems hit list. By the time the election rolled around, however, he seemed to be in total command: the last two polls taken before election day had him up an average of 16 points over Ron Klink. In the end, he won by only 6 points.

Santorum's next go round with voters will be much different than 2000. This time it will be in an off-year and - at least as things currently stand - most likely the second mid-term of a lame-duck President. We'll have to wait and see whether the situation produces any suspense. In the meantime, keep your eye on the Pat Toomey primary challenge to Arlen Specter as a possible early indicator of things to come. - T. Bevan 8:08 am

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