‘Atta Boy, Bacon


F

rom time to time, one must admit he is wrong — or maybe not quite right.

I’ve been critical of Jim Bacon for his jeremiads against debt and deficit spending, but last night I had a moment of epiphany that shows that he might be on target here.
By some chance, I was invited to a talk and reception up in DC at a restored mansion just off 16th Street for Prof. Jim Thurber of American University, someone I have talked to for magazine stories over the years, A number of foreign diplomats gathered to hear Thurber, who is probably the country’s leading academic expert on lobbying Congress and federal agencies.
Thurber says that he is indeed worried about the debt and that at some point it could become 100 percent of GDP. The Congressional Budget Office says that the debt as percentage of GDP was 33 percent in 2001 but will be about 54 percent this year and could be 68 percent by 2019.
One reason, Thurber notes, is the troubled history of PAYGO, which was instituted in 1990 during the George H.W. Bush Administration which compels any new spending not be added to the federal deficit. Bill Clinton adhered to PAYGO and the U.S. budget deficit shrank to a surplus. The PAYGO expired in 2002 and was not renewed in part because Bush II was anxious to get to his unneeded and irresponsible tax cuts.
Congress has screwed around with PAYGO ever since. The results have been catastrophic: a $236.2 billion budget surplus in 2000 quickly grew to a deficit of $377.6 billion after 2003 and keeps growing.
Prof. Thurber says the Wars in Iraq and Afghanistan are “immoral” in the sense that the U.S. is not paying for them, really. It is borrowing for them. Of course, in my view, this is a Bush policy that the right wing can’t stick on Obama despite all the outcry over his stimulus package and health care bill.
A few other nuggets from Prof. Thurber:
  • Obama has been a big success in his ability to focus, speak publicly, administer staff and turnaround America’s image overseas which had been badly damaged by Bush.
  • He made a big mistake early on by simply turning over the Congress such major legislation as “cap and trade” to reduce greenhouse gases. In the hands of Rep. Henry Waxman and lobbyists, the result has been a dog’s breakfast.
  • Congress has been so polarized that there is really no “middle” any more.
  • Obama mishandled the health care reform initiative and is paying the price. One wonders why Senate Finance, instead of more appropriate health committees, are leading the charge.
  • Efforts to reform financial services and police practices such as off the books derivatives trading that almost brought the money system to its knees are getting the “slow dance” by lobbyists. The strategy is to slow all reform efforts down so only a few things really get passed.
  • Lobbyists are having a field day.

Anyway, it was a fun evening. And Bacon should take a bow.

Peter Galuszka

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26 responses to “‘Atta Boy, Bacon”

  1. Anonymous Avatar

    "It's not debt if you don't put it on the books."

    George Bush

  2. Anonymous Avatar

    Peter – how does the current level of "war debt"(pre-Obama) compare with the "war debt" for World War II? Adjusted for inflation, of course.

    That would be an interesting point of comparison.

    TMT

  3. It's important (I think) to understand where our debt came from.

    We had tax cuts, Medicare Part D and two wars done "off budget" and on the credit card.

    Then we had an economic meltdown that resulted in the TARP, bank Y auto company bailouts and the stimulus.

    what did I leave out? Last I heard, the Clinton Administration did budgets with PAYGO and did, in fact, produce a balanced budget.

    From that point on, we "lost budget discipline" to put it politely.

    With regard to the much maligned stimulus plan that this administration has been beaten over the head with…

    I note this headline:

    " G-20 to maintain stimulus plans"

    http://washingtontimes.com/news/2009/sep/26/g-20-will-maintain-stimulus-plans-until-jobs-retur/

    Now what this tells me is that the stimulus is much more than some kind a cockamamie "Obama" Plan…

    as important or more important:

    " One year after a financial crisis that began in the United States tipped the world into a severe recession, leaders from both rich countries and fast-growing powerhouses like China agreed on Friday to a far-reaching effort to revamp the economic system.

    The agreements, if carried out by national governments, would lead to much tighter regulation over financial institutions, complex financial instruments and executive pay. They could also lead to big changes and more outside scrutiny over the economic strategies of individual countries, including the United States."

    “I’m quite impressed,” said Eswar S. Prasad, an economist at Cornell University who had initially been skeptical about the proposed “framework” for stable growth. “A commitment by the U.S. to take the process seriously is a potential game-changer that would give the framework some credibility.”

    “The announcement today is more than symbolic,” said Robert M. Kimmitt, who served as deputy Treasury secretary under President George W. Bush. “The fact that leaders are turning to the strategic challenge and doing it in a coordinated way at the level of the Group of 20 is significant.”

    http://www.nytimes.com/2009/09/26/world/26summit.html?_r=1&hp

    Of course, as always, these are words and actions are harder but I have one parting question of folks and that is of the things that the G20 apparently have agreed upon including the US – how much of this would have happened in a Bush/Republican centric Presidency?

    Why do I ask this question?

    No.. not to whack on the past – though tempting (and I'm often guilty of) – but to point out that the current administration is actively working and cooperating with the rest of the world rather than the arrogant swagger than has defined us to the rest of the world for far too long.

    In other words, this country along with the most economically important next 19 countries in the world (which comprise 90% of GDP) – have acknowledged the debt issue and it's implications if not addressed.

    so the fact that this country is now seeing itself as one of 20 instead of ruler of the world is a promising sign for me.

    there is no question that we are in a hole and some question as to whether we have stopped digging and turning out attention to how to climb out of it – but I do think we do recognize the seriousness of the problems now instead of pretending that as long as we keep our debts "off budget" they don't count.

    that's a minor yet earth-shaking change and gives me some hope to believe that he current administration is not going to spend us into oblivion….

    stranger things have happened.. you know.. the tax & spend Dems give us a balanced budget and the folks who billed themselves as fiscal conservatives put the country into a economic ditch.

  4. Gooze Views Avatar
    Gooze Views

    TMT,
    I cheated and checked Wikie:

    In 1950, (includes lots of WWII debt), the debt was 94.1 percent of GDP.
    This year it is estimated to be 90.4 percent of GDP.

    The ratio tracks nicely with the PAYGO years — that is it dropped to about 38 percent around the time PAYGO expired and has soared since.
    As noted, we are paying for the Iraq/Afghanistan wars with borrowed money. Although those efforts are nowhere near the economic commitment of WWII it is interesting how the debt as % of GDP tracks.
    Larry G. is absolutely right in noting that Democrat Clinton gave us balanced budgets while W totally screwed them up. Yet, all the right wingers now are screaming about unbalanced budgets, debt, Obama, etc.
    Peter Galuszka

  5. Anonymous Avatar

    Peter:

    I agree that Clinton, but only after the Republicans took over the Senate and the House, balanced the budget. Clinton had raised taxes, but the GOP put the brake on spending. Then the GOP got lost in the foolishness of the K Street Project and its spin-offs.

    One tax increase I'd support would be 80% of all capital gains held for less than six months. And Ray, I don't give a darn about liquidity for some investors.

    We need to get rid of trading and arbitrage. Reward people for long-term investments.

    Make anyone getting paid to contact Congress and staff regarding spending to put it in writing and post it on the Internet.

    Develop contract management skills in the government — at all levels.

    Set a limit — say $100 million that can be passed along to either heirs, beneficiaries and charities tax free. Tax the heck of the rest. Gates pays big time whether he gives his money away or to his nephew.

    Set a 25-year limit on the life of any tax-free foundation.

    TMT

  6. "…. but the GOP put the brake on spending. Then the GOP got lost in the foolishness of the K Street Project and its spin-offs."

    TMT you crack me up!

    are you talking about the SAME Republicans who show fiscal conservatism under Clinton then went 180 degrees under Bush?

    Bonus question: Was Clinton himself a supporter of PAYGO and a balanced budget?

    Double Bonus Question: Were you among those who "blamed" Clinton for cutting DOD in his quest to get to a balanced budget?

    fess up TMT… is what you say now -the same as you said then?

    Are you into some other alternate reality here?

    Triple Bonus Question:

    TMT, if you believe as you said that the Republicans somehow, "lost their bearings"….

    tell me again why we should now vote them into office?

    quadruple Bonus:

    If Clinton could run again, and he again promised a balanced budget and would get there, again, in part by cutting DOD – would you vote for him?

    honest abe….

    who would have thought that at the end of 16 years of Presidency equally split that the oft-labeled tax & spender would leave a legacy of a balanced budget and the fiscal conservative with 6 years of total fiscal-conservatism rule would leave us in the ditch?

    at some point – youse guys will no longer to able to maintain a consistent spinning of past events to suit your own beliefs…

    the truth is that the fiscal conservatives are nothing of the kind. that's an undeniable fact given the events of the last 8 years.

    fess up… it's the truth isn't it?

    no excuses that it wasn't their fault… they were confronted with the issue – and they failed miserably.

    and yet.. they'll still get 20-30% of folks who will insist that this President is yet another tax & spender and the cure is more fiscal-conservatism governance.

    gag me with a corn cob – please.

  7. James A. Bacon Avatar
    James A. Bacon

    Peter, That's rare praise indeed, and I greatly appreciate it!

    I agree with you, Bush II put the War on Terror on a credit card, which contributed mightily to the run-up in national debt. He also failed to enforce budgetary discipline, never wielding a veto, when the Republican-controlled Congress began its deficit spending.

    But I do find Larry's rewriting of history to be laughable in trying to exonerate Democrats for any culpability in running up deficits — especially given the evidence of the past eight months. I'll let TMT carry my water for that one, however, because I don't want to get bogged down in the blame game. The blame game accomplishes nothing.

    What we need to do going forward is to look at the situation as it is NOW, and project forward to where it's likely to be. Republicans won't like the fiscal future because it spells the end of American empire. No longer will America be able to afford to be the world's policeman. Democrats won't like it because it spells the end of the social safety net.

    It's going to be a very ugly world in 20 years if we can't get over this totally unproductive, partisan blame game and focus on how to preserve what matters to us — (a) a strong America (not necessarily an interventionist America but at least one strong enough to defend its vital interests) and (b) a social safety net while (c) preserving our economic competitiveness in a global economy.

    If we don't get over the bickering, our world will be unrecognizable in 20 years — and not in a good way!

  8. If we had judged the Clinton Presidency after 8 months in office rather than 8 years, what would it have been?

    All I'm saying is that by judging a Presidency after 8 months of a budget and economic meltdown is, in fact, engaging in the blame game.

    Everything that this Presidency has done that has added to the budget was deemed by many experts – world wide – to be necessary and what he has done is much the same as the rest of the G20 has done on a worldwide basis.

    we did not get to this point in 8 months.

    Waiting for 8 years and 8 months to finally wake up and smell the coffee… to talk about the "disastrous" policies of the last 8 months???.

    If I had heard even a WHIMPER back during the Bushie years about the "exploding" deficits and the harm that would be done to the kids and all that rot – then youse guys would have had at least one leg to stand on… (but not two)..

    but as I recall.. the wailing and gnashing of teeth did not begin until 8 years and one month later…

    If we really want to go forward – honestly – then we talk about what we need to be doing ahead of us…. right?

  9. Here's what I get out of this.

    By the time that Obama got into office, the realization that we already had a significant deficit left some folks thinking that Obama would not be able to do the TARP, or the bail-outs nor the stimulus… because we were already broke…

    that if he did those given the circumstances, it would be irresponsible because it would push an already terrible deficit to an untenable one.. that could last for for a decade or longer perhaps a generation.

    The Obama folks – listening to many of the advisors to the Presidency (which included many associated with the prior administration)…

    …became convinced that as bad as the tarp/bail-out/stimulus was that to not do it would result in an depression as bad or as worse as the previous one…

    and in their minds – irresponsible to not do it. Note than many (not all) of the G20 agreed with that assessment.

    …so they made their choice – knowing full well the longer-term implications for the deficit…

    .. it was a judgment call in response to events they did not cause but had to deal with…

    so what I was folks here is – how much of what I wrote above do you not agree with?

    what parts have I got wrong?

    thanks

  10. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    "what parts have I got wrong?"

    You can start with our plunging headfirst into the hedgerow country of globalization. We 'evolved' from importing raw materials and exporting finished goods, to a country importing those goods while exporting computer bytes that were no more tangible than the Federal Reserve's accounting books.

    We became a service economy, which anyone who has ever called a help desk can tell you is a lowest common denominator enterprise. And now the talking heads banter on with their lofty analysis of why America became THE debtor nation of all time.

    During the hype, money poured into the market as common citizens invested in the 21st Century, only to be met with grief as the new Information Age bit the big one. Beaten up and facing flat-line wages, those same citizens invested their money into a sure thing, real estate. Today they have hunkered down into highly reported savings schemes like the money market, where the Fed is busy pilfering comparative safety and replacing it with the toxic garbage they paid the TBTF bankers a bonus for.

    But hey, things could be worse. We could be hiding in a cave somewhere. Luckily our fearless leaders have reached a compromise with our G20 lenders. We promise to be more financially responsible, and they promise to not bomb us into the Stone Age.

  11. well geeze is that all?

    I thought there was a major issue here…

    😉

    so..bottom line.. you're in the camp that believes that the govt should not have done the TARP/bailouts/stimulus – they were not necessary and they essentially sealed our fate?

    and you believe that if Obama had refused to do the TARP/Bailout/stimulus that we would have been "ok"

  12. Gooze Views Avatar
    Gooze Views

    Jim,
    Let's examine this:

    "But I do find Larry's rewriting of history to be laughable in trying to exonerate Democrats for any culpability in running up deficits — especially given the evidence of the past eight months. I'll let TMT carry my water for that one, however, because I don't want to get bogged down in the blame game. The blame game accomplishes nothing."

    The Obama Adminisntration and the Democratically controlled Congress has done essentially two things so far:

    (1) Continued the TARP bailout which was a Republican/George W. Bush show.
    and
    (2) Push ahead with the $787 billion stimulus, which is designed to pump prime our way out of the worst recession since the Great Depression that began roughly in December 2007 (Bush again) and was caused in large part by Bush policies (increasing debt to equity reaios (2005) and ignoring the danger sof subprime lending and exotic financial derivatives.

    What's so laughable here?

    You remind me of when I interviewed GOP minority whip WEric Cantor who is tryin g to lead a charge against Obama.

    "We've got to get the government out of the finanical markets," he told me.

    I said: "But Congressman, it was Bush and the GOP that got us INTO the financial markets last year with TARP."

    Cantor was silent for about 20 seconds.

    In fact, Jim, if you really want to find examples of Democrats who really were into deficit spending, you have to stretch all the way back to LBJ, who borrowed to pay for the Vietnam War and the Great Society. Carter cut government as did Clinton. Reagan turned out to out-Keynes the Dems.

    So I don't think your comment holds much water.

    Peter Galuszka

  13. Anonymous Avatar

    I've never faulted Obama for TARP. He merely continued what was occurring when he took office. The Recovery Act has, so far, been mistargeted and unsuccessful. Most of the infrastructure money hasn't been awarded. Infrastructure spending is of value, IMO.

    But much of the Recovery Act money went to save state and local government employee jobs – just a union payoff.

    We still need to fix a lot of wasted tax dollars in state and local government. For example, Fairfax County Supervisor John Foust (D) created a budget task force last year to look at county and school spending. The task force identified a large number of duplicate and unnecessary jobs that were recommended for elimination, along with a number of subsidies to business. Guess what? Recovery Act money was used to avoid the tough decisions, along with the usual campaign contributions from the real estate industry to save its subsidies.

    Multiply that by 50 states and who knows how many local governments.

    We'd most certainly be better off had the Democrats nominated Hillary Clinton.

    TMT

  14. Anonymous Avatar

    ummerin"We need to get rid of trading and arbitrage. Reward people for long-term investments. "

    Wrong. We need more trading and more arbitrage: that is how you discover price, which is what you need to know in order to support the decisions which underly long term investments.

    You cannot have long term investments without short term profits, and that is why you need to discover the true current price.

    We may very well reward people through additional incentives for long term investment, but getting rid of short term investment or penalizing trading in some way is – well – shortsighted.

    RH

  15. Anonymous Avatar

    "But much of the Recovery Act money went to save state and local government employee jobs – just a union payoff."

    —————————-

    Cartoon in yesterdays paper —

    First panel: six construction workers standing around watching one guy with a jackhammer.

    Second Panel: nine construction workers standing around watching one guy with a jackhammer.

    Caption: At first the effects of the stimulus package were subtle.

    RH

  16. "union payoffs"

    ..the implication that the Dems cannot win without union support that must then be "paid off" and union support is defined as Fed and State govt workers?

    come-on TMT … if this is not blatant partisan rhetoric what is?

    DOD is an equal opportunity "stimulus" if there ever was one – right?

    It's apparently fine for us to hire a ton of young people and build a gazillion humvees and body armor on the credit card but not domestic govt workers ?

    do ..we're fine going into the hole on military weaponry and personnel but not a penny for the civilian DOD – ironically – the economic lifeblood of NoVa?

    geeze TMT…

  17. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Yeah well, as someone who grew up 'out there', I can tell you that time stands still. All of the modern innovations you take for granted, like radio, TV, telephones, newspapers and the Internet will never trump a culture that gains its news over the breakfast special at a local diner.

    As for whether my tent is pitched in the camp that thinks the government should not have done TARP, sorry but you are wrong. I tend to follow the path that denounces the policies that got us into this position to begin with.

    Oh and one final thing. I'm feeling tremors that the NoVa cash cow is fixing to be slaughtered. Tapping into grapevines has been one key of my career success, and for the past month the vines around here have been squirming more than fresh caught earthworms tossed on hot asphalt. They are kind of like those folks up on Northern Neck. The sounds you hear don't make a lot of sense, until Judgment Day.

  18. I'm getting a sense that some simply do not trust nor have confidence in the government – not only national, but state and local. (yeah, I guess I'm slow to the "duh" moment)

    The video from a Rob Wittman (Va 1, formerly Jo Anne Davis) not only documents a lady who is convinced of an impending law that will take away her guns – but she is further convinced that the law is a conspiratorial product of "czars" who somehow will get the law implemented without "interference" from elected representatives.

    and then if that's not scary enough – there are murmurs of agreement from others and then when Wittman tries to clear the record – many in the crowd clearly don't believe him.

    I'm have no rose-colored glasses when it comes to government especially with regard to the so-called "free speech" money that has corrupted and polluted the legislative process.

    but I'm not yet at the point of some of those folks in that Wittman town hall video.

    It's almost if Wittman has to see the world the way that they see it or he too becomes suspect.

    It's funny – almost….

    so then you ask yourself how these folks vote if they are this suspicious of government – period….

    why would they vote at all if they think that laws are really created by "staffers" who just get the legislators to do the perfunctory approval process?

    I'm not sure where this leaves folks like this if they fundamentally reject government …. makes me wonder why they bothered to show up at the town hall if they did not believe Wittman either….

    Now at the top of this I said "some" because I assume we'd not be having all this partisan debate in the first place if many folks did not believe that it was important for "their guy" to get into office…

    .. but it is a bit scary to view the process through the eyes of some of these folks….

    I'm not sure when all of this came about since we really have not seen this in normal elected officials public venues until the tea parties started but there is clearly a lot of "unrest" "out there" these days.

  19. OK Darrell – I'll bite … what on Earth are you talking about?

    "Oh and one final thing. I'm feeling tremors that the NoVa cash cow is fixing to be slaughtered. Tapping into grapevines has been one key of my career success, and for the past month the vines around here have been squirming more than fresh caught earthworms tossed on hot asphalt. They are kind of like those folks up on Northern Neck. The sounds you hear don't make a lot of sense, until Judgment Day.".

  20. Anonymous Avatar

    http://www.bcaplan.com/cgi-bin/purity.cgi

    Libertarian Purity test. Please take the test and report back your score.

    This might clarify things around here as to who stands for what.

    RH

  21. I don't think you need 64 questions much less the last one:

    Would you call yourself an "anarcho-capitalist?"

    this needs to be structured like those polls that use the money questions early on and then use other questions to lock down your exact color.

    For instance:

    Question 1: "Do you think Glen Beck mostly has it right"?

    Question 2: " Who is Ron Paul"?

    Question 3: "Would you abolish Medicare and Social Security".

    See… 3 easy questions…

    Then you get the Bonus Question to see if you really are a real libertarian or not.

    Question 4 (for extra credit):

    Explain the primary difference between the FAIR Tax and a National Consumption Tax.

    easy….

    and once we get all these freeloaders off of MEDICARE, we can get our economy back on track…

    the most important duty of geezers is to expire… with the least possible cost to others.. no fair living longer than predicted!

  22. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    OK Darrell – I'll bite … what on Earth are you talking about?

    I was responding to Larry's comment about the economic lifeblood of NoVa.

    In any organization there are three channels of communication and influence. The first is the official channel. The second is the Rumor Mill, an informal channel made up of just about any story that can be repeated. And the third is the grapevine, which is made up of connected insiders throughout an organization's structure.

    I utilize that informal third channel to gain access to tools, parts, and expertise that might not be officially available. The military called guys like me a Scrounger or a MacGyver. I find what I need to get the job done. Especially handy when you are in the middle of nowhere.

    Heck, you're a high level kind of guy, so you probably learned this comm channel stuff a long time ago. Maybe my hillbilly tale just got you confused. heh…

  23. yes but Darrell.. I'm sure he wanted to hear the content of the communications you are receiving with regard to the impending slaughter of the NoVa economy…

    no?

  24. Groveton Avatar

    Actually, I wonder why the analysis is based on rumor.

    Obama will cut military spending. You don't need much of a grapevine to know that. Some places will lose more than others. NoVA will be cut a bit. But Ft. Belvoir will expand, Ft Meade will expand and the Pentagon is eternal (for better or for worse).

    Obama will also greatly increase the Federal civilian beauracracy. Regulatory bodies will grow and so will some of DC's institutions.

    Will the decrease in military spending be offset (in NoVA) by the increase in civilian spending? I think it will be close.

    Now, Darrell, if you know that the Pentagon or the CIA or the NSA was moving – that would be some real grapvine "dish". But a general belief that Obama will cut military spending isn't exactly "hot off the presses".

    Clinton cut military spending too. NoVA survived. In fact, there was barely a hiccup.

  25. Larry G Avatar

    It was Mr. Eisenhower, I believe, who warned us about the Military-Industrial Complex.

    What it boils down do – is that it's okay to use tax dollars to build Humvees (that provides jobs) but it's not okay to pay GM to produce Impalas (that also provide jobs).

    Calling Defense spending as an "investment" is a double oxymoron when one considers that we spend more on the military than the next 10 countries in the world combined

    yet our theory is that this country would be obliterated by our foes in the world if we don't continue to spend at the current rates…

    Shucks.. I just don't know how these others countries can go to sleep at night – knowing that they are doing defense "on the cheap" while the US foots the bill for worldwide security.

    I'm sure I've got this screwed up somewhere…

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