Are federal budget deficits good or bad? It all depends.
This question is evoked by what is happening in Washington right now, i.e., the federal deficit is growing by the billions. When President Clinton left office, the budget was pretty much in balance. Indeed, it was one of the few moments in the long history of the United States that this was true. George Washington was “first in war, first in peace and first in the hearts of his countrymen.” He was also the first president to run up a sizable deficit in the federal account. His successors did not do much better. Against that historic background, the Clinton achievement is worthy of note. Equally noteworthy, for opposite reasons, is the present and projected deficits under the Bush administration.
In one respect, a parallel policy of running deficits as a way to stimulate the economy was used by Franklin Roosevelt in the New Deal days of the 1930s and is being used by Bush today. They both incurred mounting debt as a way to bring the economy back to its feet.
But there was (and is) a dramatic difference in how they used the money they were borrowing by the billions. Roosevelt used the borrowed money to put extra bucks in the pockets of working people; Bush has incurred mounting debt to lift the income of the wealthiest in the land at the expense of everyone else.
Let’s be specific. When Roosevelt came into office in 1932, he borrowed heavily to underwrite projects that would give people jobs. The projects were called “public works,” like the Civilian Conservation Corps, which put jobless people to work to preserve and to promote forest lands. Young people were enrolled in the National Youth Administration to conduct surveys to see what homes needed modernization and where homes were needed for the homeless. People were put to work on the Tennessee Valley Authority to tame the rivers that were constantly overrunning their shores and to turn the area into a beautiful nature preserve, a place for hunting and fishing, while, at the same time, harnessing the waters to generate electricity to provide energy for the Rural Electrification Administration. And more and more. The millions who were put to work became active consumers, thereby putting others to work.
Bush has done just the opposite. Instead of using the government to underwrite projects that directly put people to work, he has enacted a tax cut whose chief beneficiaries are a slim top sliver of the nation’s richest. That cut has cost and is costing Uncle Sam billions of dollars. This gift to the economic elite has left a deep, deep hole in the federal budget and forced Bush to fill the void with borrowed money.
Put plainly, the difference between Roosevelt and Bush is that Roosevelt borrowed to give money to millions of working people while Bush has borrowed money and is borrowing more money to give billions to billionaires.
In Bush’s mind, enriching the richest should be good for everybody because Bush, like President Reagan, believes that the rich will put their newfound wealth to work to provide jobs. But they didn’t, because they were not about to produce products when there was little or no market for their wares because of rising unemployment and declining wages. The result was catastrophic. When Reagan came in, the national debt was a trillion dollars, and when, eight years later, he left office, the national debt had tripled to $3 trillion.
Of the Bourbons, it is said that they never learned anything and they never forgot anything. Perhaps the same can be said of our recent Republican rulers.