Middle of the Road
July 26, 2010

Deficit spending during economic crisis

Wright: “Congress must break its addiction to spending.” “The people of east Alabama deserve better.” “Out of control.” Congressman Rogers, I could not agree more with your bi-weekly column from July 15 (available online at www.postpaper.com). Thank you for admitting that the federal deficit is a huge problem that this nation has to face.

I only have a couple of questions.

First of all, what was your stance on this issue when President George W. Bush turned a budget surplus into a four trillion dollar deficit fighting his preemptive war of choice in Iraq? Secondly, did you have this opinion when you first took office in 2002, right around the same time Vice President Dick Cheney reportedly told Treasury Secretary Paul O'Neill (just weeks before firing him for publicly stating otherwise) that “Reagan proved that deficits don't matter”?

I subscribe to the theory laid out last November by John B. Judis, senior editor of The New Republic, who wrote: “Won't greater deficits lead to greater debt, which will burden our grandchildren with intolerable obligations? They will in the short term, but they are also the only way to avoid even higher debt in the longer term.  The current deficits are much more the result of lost revenues than of increased spending — and they will begin to diminish only when revenues (wages and profits) begin to rise again. That won't happen without deficit spending now.”

You and I are both in agreement that deficits are bad for America, at least in the long term. But how does your proposal for implementing what would surely become a years-long effort to reduce the federal deficit do anything to solve our nation's short-term problem of millions of lost jobs?

Rogers: Scott, I'm glad to know you agree with me that congressional spending is out of control, and glad to once again join you in the “Middle of the Road.”

Let's cut to the chase. You quote Mr. Judis to advocate that Congress should pass more deficit spending to grow the economy. The more the economy grows, the more jobs are created, meaning more people paying taxes, therefore resulting in higher government revenues and lower deficits. That's all well and good. However, that approach works only if Congress passes the right kind of pro-growth policies and does not go on a spending spree that eats up all the additional revenue.

You ask about the war and I disagree with the premise of your question. On 9-11, we were attacked and had to go to war, ultimately in two theaters, which in conjunction with a recession turned the surplus into a deficit. The war in Iraq was not a war of choice, but a war of necessity based on intelligence that Iraq had, and intended to use, weapons of mass destruction. Also, when I first took office the debt and deficit spending were still manageable as a percentage of GDP.

Here's the current problem: Congress and President Obama missed the mark, big-time. The Democrats' nearly-$800 billion stimulus bill was a wasted opportunity. The health care bill? Strikeout. Neither is pro-growth over the long term, and I am deeply concerned that both will end up hurting private sector job creation. Most folks across east Alabama, and America, agree and are fed up. That's why 2010 is different. Congress passed a bunch of spending and none of it worked. Folks back home now just want Congress to get spending under control.

Long-term, we both agree the more debt our country owes, the bigger the financial burden we are putting on our children and grandchildren. Struggling Alabama families understand that. The stimulus bill did almost nothing to save or create jobs. They get that, too. Alabama still sits at 10.3 percent unemployment – the same place we were last year. And since January of 2009 when President Obama took office, our country has added $4.9 billion, yes billion, to our debt every single day. That's got to stop.

When President Bush left office, our deficit spending was at $400 billion. In 18 months, President Obama's proposed budget is at $1.6 trillion in deficit spending, quadrupling Bush's last deficit. Moreover, when Bush left office, the national debt was $10.6 trillion. By the end of this year, Obama will have taken that to almost $14 trillion.

I think asking Speaker Pelosi, “where are the jobs” would be a good start. I've been asking her and the Democratic leadership that very question for months.

Wright: Congressman, I don't think anyone who knows anything about the stimulus bill or the health care overhaul would argue with your assertion that neither is “pro-growth over the long term.”

Nor were they designed to be. The latest round of stimulus spending, originally the brainchild of President George W. Bush's Treasury Secretary, Hank Paulson, was instituted to try and prevent a nationwide – perhaps even a worldwide – economic calamity, which it seems to have done, at least so far. And I'll be the first to give Paulson the credit if the plan he helped hatch actually averts another Great Depression. The way I see it, Obama's stimulus package – designed to create jobs only for a year or two – was an extension of that same thought process.

Similarly, the health care overhaul was designed to simply (at 2,409 pages, perhaps that's a poor choice of words) make sure people who are too poor to purchase adequate health insurance can see a doctor if they get sick, and it was billed as such by those who championed it.

Therefore, it seems to me that complaining about either of these programs because they are not “pro-growth over the long term” is as erroneous as an Auburn fan complaining that his team has never won the Daytona 500.

I'd love to cut the deficit, Congressman. But both I and a little over half the people you work with do not believe this nation cannot afford a policy like that. Not right now. Another person who feels the same way is Keith Hennessey, the man who served as director of President Bush's National Economic Council. In February, he wrote a column for Clusterstock.com in which he ranked President Obama's stimulus recovery plan fourth behind three other options he considered more likely to generate quick economic growth for America.

But Congressman, not a single one of his four options mentioned anything about trying to reduce the deficit in a time of prolonged, nationwide economic crisis. I'll ask you the same question Mr. Hennessey asked of spending critics in his article: “If you were in charge, would you instead have done nothing?”

Congressman, since I picked the topic this time, you get the last word. I truly appreciate your efforts to stay in touch with our readers, and I look forward to our next debate.

Rogers: Scott, I think we've got a basic disagreement here. I also think when you mention stimulus being Paulson's brainchild you are referring to the TARP (Troubled Asset Relief Program) which, while very controversial, did help avert a global meltdown.

So far, I believe the $787 billion stimulus and the health care bill have, in fact, done more harm than good. The stimulus was, in fact, supposed to create jobs and stimulate the economy, but it did not do enough of either. It was a failed policy from the beginning. Worse, it set in place structural changes to federal and state governments which mandates increased and unfunded spending permanently – Medicaid eligibility, for example – which is anything but a temporary stimulus measure.

Same with the health care overhaul. Yes, its backers said it was to enable those without health insurance to get it. But in the process the overhaul also put permanent mandates on small businesses – the heartbeat of our local economy – which down the road may force them to downsize and cut back on hiring or expansion.

So it sounds like you and I stand on opposite sides of the same issue. We agree on what needs to be done – deficit and debt reduction – but disagree on the approach and timing. This is the exact debate going on in Washington right now, as well as in Europe, and it will be interesting to see which policy solution prevails in America.

You ask what I would do. For starters, I think the first thing Congress should focus on is passing legislation that truly helps the private sector create jobs. I'm sure your readers have seen the recent news of new jobs coming to Piedmont, right down the road. One way to help support the creation of these new jobs at the federal level could be to offer additional tax credits to small businesses to hire employees or open new businesses.

There's no one silver-bullet fix, but my belief is if you look at the big picture and see what has gone on under Obama and Democratic-controlled Congress it's clear that their heavy fiscal stimulus approach just hasn't worked. Instead, it has grown government, caused astronomical borrowing and spending, and fostered little if any long-term private sector job creation.

I think the time for fiscal restraint is now. Our debt burden will soon pass 70 percent of GDP, with 80 percent — and then 90 percent — only a few years away. If we don't start chipping away at it now, the future for our children and grandchildren simply won't be as bright.

We owe them better.