Scapegoats Won't Bring Down the Deficit
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- It is an article of faith among Democrats that the administration of George Bush caused plagues, pestilence and the nation's economic woes -- and by derivation the political morass that bests Washington.
The New York Times asserts huge budget deficits have resulted from the Iraq and Afghanistan wars and Bush tax cuts -- which by the way lowered tax burdens for all Americans not just millionaires and billionaires.
Consider, in 2007 -- the last fiscal year before the Great Recession and the Democrats took control of Congress -- the deficit stood at $161 billion -- about one-tenth its present size. Two wars were at full tilt, and the Bush tax cuts and prescription drug benefits, which congressional democrats are always inclined to cite, were in place -- all for several years.Hmm, how can that be? If Mr. Bush's policies caused the current big deficits, why did those require a change in party control, in Congress and then the presidency, to happen? Simple observation indicates those policies were not the cause, and huge deficits, like a lot of ills, were caused by the economic collapse of 2008, which was motivated by bad economic policies that political parties had a hand in creating. Mr. Bush, like Mr. Obama, inherited a country with deep economic troubles -- granted Mr. Obama's situation was much worse, because the nation's structural problems have been cascading through cycles of expansion and recession for several decades. Mr. Bush did pursue pro-growth policies and got unemployment down to about 5% before the Great Recession.
Roots of a ProblemThe terrible event was caused by "financial reforms" Treasury Secretary Larry Summers persuaded President Clinton to push through Congress. Those repealed Glass-Steagall and other constraints on abusive behavior by financial institutions that now plague Wall Street and America, and a gaping trade deficit that is nearly all accounted for by excessive reliance on imported oil and a massive trade deficit, mostly with China, and the rest of Asia. The latter deficit is a major component of the imbalance in demand for goods and services between the economies of Asia, the U.S. and Western Europe, and a significant reason Asia grows at near 10% and the West at only about 2%.
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