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Sunday, February 6, 2011
Ronald Reagan: the father of the debtor nation assault on mental health by web
As politicians from both parties celebrate Ronald Reagan's 100th birthday this Sunday, February 6, 2011, one key and very painful fact which will be largely overlooked is that Reagan made America a debtor nation for the first time in its history. Ronald Reagan is the father of the debtor nation.
Jonathan Weisman of the Washington Post summed it up when he wrote in 2004, "The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be 'out of control,' the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation." Today the national debt stands at over $14 TRILLION or more than $40,000.00 for every man, woman and child living in the United States.
Perhaps Reagan got us into this mess due to his inability to understand reality. In 1984 he gave a speech to the Christian charlatans who are religious broadcasters. In his address to the National Religious Broadcasters Convention he was praising the liar and con-man Pat Robertson when Ron said, "In his book, 'The Secret Kingdom,' Pat Robertson told us, 'There can be peace; there can be plenty; there can be freedom. They will come the minute human beings accept the principles of the invisible world and begin to live by them in the visible world.'" Maybe Ron's reliance on the invisible/non-existent principles of Pat Robertson and the Bible helped destroy America's very real and visible economy and made it a debtor nation for the first time ever.
In his speech to the Christian charlatans Reagan went on to brag that he declared 1983 to be the "year of the Bible." (He also rambled on implying George Washington was a Christian who got on his knees and prayed at Valley Forge when this is not true. George Washington was not a Christian, he was a Deist.)
Based on this speech, Reagan strongly believed the Bible to be "The Word of God." He said to the televangelists, "1983 was the year more of us read the Good Book. Can we make a resolution here today? -- that 1984 will be the year we put its great truths into action?"
One of the "great truths" of the Bible, one of its primary reasons for being, particularly the Old Testament, is the promotion of Israel over all. It seems Ronald Reagan made one Bible prophesy come true. Isaiah 61:6 has God promising the Hebrews/Israel that they will "eat the riches of the Gentiles." Reagan helped make this a reality in 1985 when he helped push through the first ever "free trade agreement" with Israel. This was the first in a long line of devastatingly harmful agreements and treaties which are still harming working people. In his thought provoking and enlightening book, Spy Trade: How Israel's Lobby Undermines America's Economy, Grant F. Smith points out that this Reagan backed agreement with Israel has cost American workers over 1 million jobs over a ten year period.
The Real Reagan Legacy
Debunking Myths About Reagan
by Mike Hersh
March 19, 2002 (Political Sanity/APJP) -- Let's begin our examination of the real Reagan Legacy by taking a look at myth number one: Democrats dominated Congress all through Reagan's terms, and called all his budgets Dead On Arrival.
That's numerically and historically false. Reagan's people shoved his program through the Congress during the early Reagan years. James A. Baker, David Stockman and other Reaganites ran roughshod over Tip O'Neill and the divided Democrats in the House and Senate, and won every critical vote. This is because of the GOP majority in the Senate and the GOP-"Boll Weevil" (or "Dixiecrat") coalition in the House. Phil Gramm was a House Democrat at the time, and he even sponsored the most important Reagan budgets.
Only after the huge Reagan recession -- made worse by utterly failed Reagan "Voodoo Economics" - did Democrats regain some control in Congress. They halted some Reagan initiatives, but couldn't do much on their own. That was a time of gridlock.
Six years into Reagan's presidency, Democrats retook the Senate, and began to reverse some of Reagan's horrendous policies. By that time, Reaganomics had "accomplished" quite a bit: doubled the national debt, caused the S&L crisis, and nearly wrecked the financial system.
Which brings us to myth number two: Jimmy Carter wrecked the economy, and Reagan's bold tax cuts saved it.
This is utterly absurd. Economic growth indices -- GDP, jobs, revenues -- were all positive when Carter left office. All plunged after Reagan policies took effect.
Reagan didn't cure inflation, the main economic problem during the Carter years. Carter's Federal Reserve Chairman Paul Volcker tried when he raised interest rates. That's the opposite of what Fed Chairman Alan Greenspan has done to keep inflation low.
Carter's policies and people fought inflation, but maintained real growth. On the other hand, Reagan's policies helped cause the worst recession since the Great Depression: two bleak years with nearly double-digit unemployment! Reaganomics failed in less than a year, and it took an entire second year for the economy to recover from the failure.
Carter didn't cause the inflation problem, but his tough policies and smart personnel solved it. Unfortunately for Carter, it took too long for the good results to kick in. Not only didn't Reagan help whip inflation, he actually opposed the Volcker policies!
Another major myth: Reagan cut taxes on all Americans, and that led to a great expansion.
Here's the truth: the total federal tax burden increased during the Reagan years, and most Americans paid more in taxes after Reagan than before. The "Reagan Recovery" was unremarkable. It looks great only contrasted against the dismal Reagan Recession -- but it had nothing to do with Supply Side voodoo.
With a red ink explosion -- $300 BILLION deficits looming as far as the eye could see -- GOP Senators, notably including Bob Dole, led the way on tax hikes. The economy enjoyed its recovery only after total tax increases larger than the total tax cuts were implemented. Most importantly, average annual GDP growth during the Reagan 80s was lower than during the Clinton 90s or the JFK-LBJ 60s!
Enough about the economy. Here's the biggest myth of them all: Ronald Reagan won the "Cold War".
In reality, Reagan did nothing to bring down the Soviet Union.
By 1980, the Soviet Union was trying to cut its own defense spending. Reagan made it harder for them to do so. In fact, Reagan increased the possibility of a nuclear war because he was -- frankly, and sadly -- senile. He thought we could actually recall submarine-launched nuclear missiles (talk about a Reagan myth), and bullied the Soviets to highest alert several times.
Critically, Reagan never even tried to bring down the Soviet Union.
Wasteful overspending on defense didn't end the Soviet Union. In fact, it played into the hands of authoritarian "Communist" hard-liners in the Kremlin. Reagan thought the Soviet Union was more powerful than we were. He was trying to close what he called "the window of vulnerability."
This was sheer idiocy.
No general in our military would trade our armed forces for theirs. If it were to happen, none of the Soviet military command would turn down that deal. We had better systems, better troops, and better morale.
Here's the truth: we'd already won the Cold War before Reagan took office. All Reagan needed to do was continue the tried-and-true containment policies Harry S. Truman began and all subsequent presidents employed. The Soviet Union was Collapsing from within. The CIA actually told this to Reagan as he took office.
Here's an example: the Soviet Union military couldn't deal with a weak state on its own border, the poor, undermanned Afghanistan. Most of the Soviets' military might had to make sure its "allies" in the Warsaw Pact and subjects along the South Asian front didn't revolt. Even Richard Nixon told Reagan he could balance the budget with big defense cuts.
Reagan ignored this, and wrecked our budget.
We didn't have to increase weapons spending, but Reagan didn't care. He ran away from summits with the dying old-guard Soviets, and the new-style "glasnost" leadership of Mikhail Gorbachev baffled the witless Reagan and his closed-minded extremist advisors.
Maggie Thatcher finally cajoled the Gipper into meeting Gorby, and Gorby cleaned Reagan's clock. Reagan's hard-right "handlers" nearly had to drag Reagan out of the room before he signed away our entire nuclear deterrent. Reagan -- and the planet -- was lucky Gorbachev sought genuine and stable peace. Had Yuri Andropov's health held, Reagan's "jokes" and gaffes might have caused World War III.
Eventually Reagan even gave Gorbachev his seal of approval. Visiting Moscow before the August Coup, Reagan said the Soviet Union was no longer the "Evil Empire." He predicted his friend Gorbachev would lead the Soviet Union for many years to come.
As usual, Reagan was wrong. A few months later, disgruntled military officers kidnapped Gorbachev, throwing him out of power forever. Reagan remained disengaged: nothing he did caused the coup, and nothing he did made the Soviet military support Boris Yeltsin over their superiors.
We're all fortunate things happened as they did -- but once again, Reagan did nothing to make this fluke more likely.
All this is vintage Reagan. Reagan took credit for others' hard word and hard choices, and blamed them for his failures. Reagan even blamed Jimmy Carter for Reagan's foolish, fatal, and reckless decision to leave 243 Marines stationed in Beirut, helpless and unguarded.
Reagan hired over 100 crooks to run our government, and broke several laws himself. His policies were almost uniformly self-defeating, wrong-headed, immoral and unfair.
Reagan was an actor playing the part of the president. He was style over substance; lucky, not good.
And once the myths are stripped from the "legacy", the truth becomes obvious: Reagan was by far the most overrated man in American history.
Reagan Policies Gave Green Light to Red Ink
By Jonathan Weisman
Washington Post Staff Writer
Wednesday, June 9, 2004; Page A11
The line is not likely to make this week's eulogies to Ronald Reagan, but when Vice President Cheney allegedly declared, "Reagan proved deficits don't matter," he summed up an enduring argument from the former president's economic legacy.
In late 2002, Cheney had summoned the Bush administration's economic team to his office to discuss another round of tax cuts to stimulate the economy. Then-Treasury Secretary Paul H. O'Neill pleaded that the government -- already running a $158 billion deficit -- was careering toward a fiscal crisis. But by O'Neill's account of the meeting, Cheney silenced him by invoking his take on Reagan's legacy.
It wasn't that Reagan's policies proved that government borrowing had no impact on the economy. But his administration's record -- particularly with some years of hindsight -- did give reason to question traditional thinking and provided a new context for future arguments about deficit spending.
"The lesson we should have learned [from those years] is that deficits have little or no short-term economic impacts," said William A. Niskanen, a member of Reagan's Council of Economic Advisers.
As important, they appeared to have no impact politically, said Stephen Moore, a conservative economist at the Club for Growth who worked in Reagan's budget office.
"Voters and politicians became anesthetized to big deficits," Moore recalled. "Reagan was running these big deficits, and liberals argued it was going to be Armageddon. We were going to ruin the economy. Interest rates were going to go through the roof. And none of these things happened."
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.
To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.
Reagan's "economic policy . . . was a disaster," University of California at Berkeley economic historian J. Bradford DeLong wrote this past weekend on his Web site. "The tax cuts made America a more unequal place, and the deficits slowed economic growth in the 1980s significantly."
But after the boom years of the 1990s, and the steady economic slides of those international rivals, some economists are reevaluating that version of history. The argument against deficits is more about self-righteous moralism than economics, they say.
The Reagan "experience changed the debate dramatically," said Kevin A. Hassett, an economist at the American Enterprise Institute. "Back then, it seems that everybody believed Reagan must be some kind of kook and the people who agreed with these views were flimflam artists. Not so anymore."
Indeed, since the Reagan years, the argument over the deficit has been turned on its head. In the 1980s, prominent liberal economists dismissed the significance of government red ink to head off the slashing of social welfare spending. Now, many liberal economists have become the fiercest deficit hawks to head off still more tax cuts.
But the shifts go beyond politics. For nearly a century, economic orthodoxy has held that federal borrowing harms the economy by driving up interest rates, diminishing investment and productivity, and placing an unfair burden on future generations, who will finance the spending and tax cuts of the present.
Traditional economists argue that as the government enters private capital markets to finance its deficits, it competes with private borrowers. A deficit equal to 1 percent of the size of the economy -- about $110 billion today -- would slap as much as a full percentage point on the interest rates consumers pay to finance a new home or new car. By that measure, today's deficit would account for nearly 4 percentage points of a 6 percent mortgage.
But the new argument holds that interest rates are set on a vastly larger global marketplace. With rising global prosperity, even a federal deficit as large as the United States' would present little competition for would-be investors. A soon-to-be-published paper by American Enterprise Institute economist Eric M. Engen and Columbia University economist R. Glenn Hubbard, the first chairman of Bush's Council of Economic Advisers, concluded that the record budget deficit of 2004 should raise interest rates by 0.12 percent.
"The world's capital markets are lot more sophisticated and flexible than they were then," said N. Gregory Mankiw, the current chairman of Bush's economic council. "That probably means that other things being equal, changes in domestic fiscal situations have less impact."
Indeed, this school of thought is becoming something of a consensus, Engen said. Deficits equal to 1 percent of the size of the economy should raise interest rates by 0.3 percent, he said. That is the low end of the 0.3 to 0.6 percent range postulated by Brookings Institution economists William G. Gale and Peter R. Orszag when they argued deficits are economically significant.
Benjamin M. Friedman, a Harvard University economist who lamented Reagan's fiscal policies in his 1988 book "Day of Reckoning," said the expansion of foreign credit has tempered the feared hikes in long-term interest rates that he thought would cripple the economy. But, he said, "that doesn't let deficits off the hook."
"It's important to realize that interest rates are set on world capital markets; therefore, a large deficit need not impact capital formation," he said, referring to economic investments in new plants and equipment that drive growth. "But that's identical to saying we will continue to do capital formation, but we'll do it by forever borrowing abroad."
And that spells trouble, said Niskanen of Reagan's Council of Economic Advisers. Debt does have to be repaid, and foreign investors -- primarily the central banks of Japan, Britain and China -- own $1.7 billion of federal debt. That, he said, has made the country "terribly dependent" and "terribly vulnerable."
That is a bipartisan fear. "The key point is, even if it were sustainable, it's not desirable," said Orszag, a prominent Democratic economist. "We still will owe the money to foreigners. We're still mortgaging our future national income. Just because you can take out a larger mortgage to buy a bigger house doesn't mean you should."
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