The Catholic University of America
Oct 1 2010

Response to Professor Zampelli

Posted by Stephen Schneck at 9:03 AM
1 comments
- Categories: Economy | Government & Civil Society

Reading Professor Zampelli's recent post brought the lyrics of a hobo song from the Great Depression to mind.  It's Big Rock Candy Mountain and here are a few pieces of it from Harry McClintock's version.

In the Big Rock Candy Mountains,
There's a land that's fair and bright,
Where the handouts grow on bushes
And you sleep out every night.
Where the boxcars all are empty
And the sun shines every day
And the birds and the bees
And the cigarette trees
The lemonade springs
Where the bluebird sings
In the Big Rock Candy Mountains.

In the Big Rock Candy Mountains
You never change your socks
And the little streams of alcohol
Come trickling down the rocks
The brakemen have to tip their hats
And the railway bulls are blind
There's a lake of stew
And of whiskey too
You can paddle all around it
In a big canoe
In the Big Rock Candy Mountains.

Something about hard economic times lends itself to imagining prosperity without responsibility.  As Professor Zampelli's analysis shows, the GOP Pledge to America fits the mold.  What he doesn't say (and perhaps should have), is that the Democrats have, as he put it, drunk this Kool-Aid, too.  Yes, and the Tea Partiers seem to have gone for seconds.

Entirely missing from this fall's Big Rock Candy Mountain campaigns are any grown-up acknowledgements of the responsibilities and sacrifices that our times demand.  The combined costs of Iraq and Afghanistan, according to the Congressional Budget Office (CBO), will amount to between $1.6 trillion and $1.9 trillion.  Nearly every cent of this has been spent off-budget-that is, added directly to the national debt.  The economic stimulus plan-of which about 1/3 was tax cuts and 2/3 new spending-will cost $860 billion, most of which will also end up in the debt.  The Bush tax cuts, according to organizations like the Center for Tax Justice or the Center for Budget and Policy Priorities, have already cost between $2.2 trillion and $2.5 trillion in lost revenue-and if extended to 2018 (and neither Republicans nor Democrats have the guts to do otherwise) will cost upwards of $4.8 trillion.  Added together, these items-the 9/11 spending, stimulus, and Bush tax cuts-totaled roughly $5 trillion just to the present, and their burden has nearly doubled the national debt since 2001, which now stands at $13.4 trillion.

How we got to this point, then, is pretty clear.  Here's the track record since 2001 based on CBO numbers.  Remember; the numbers from the Bush years artfully do not include the expenditures for Iraq or Afghanistan (meaning that the real deficits were higher than shown).

           Year           Fed Revenue     Expenditures          Shortfall

           2001           1.9 trillion          1.8 trillion               none
           2002           1.8 trillion          2.0 trillion               -317.4 billion
           2003           1.7 trillion          2.1 trillion               -538.4 billion
           2004           1.9 trillion          2.3 trillion               -568.0 billion
           2005           2.1 trillion          2.5 trillion               -493.6 billion
           2006           2.4 trillion          2.7 trillion               -434.5 billion
           2007           2.6 trillion          2.7 trillion               -342.2 billion
           2008           2.5 trillion          3.0 trillion               -641.9 billion

Under Obama last year, the shortfall bumped up sharply.  Revenue was down to $2.1 trillion (owing to the recession) while expenditures (with particular thanks to the stimulus) rose to $3.5 trillion, yielding a shortfall of a whopping $1.5 trillion.  Moreover, 2010 looks to repeat the pattern of 2009 with another $1.5 trillion shortfall being estimated.

Given what has transpired since 2001, assuming that military spending, social security, and Medicare will remain third rails never touched, then no amount of government freezes, elimination of wastes, program cuts, or the like will ever truly address the skyrocketing national deficit.  That's worth repeating.  No amount of freezes, trimming waste, or program cuts will solve the deficit problem.  And, if the deficit cannot be cut, then our $13.4 trillion the national debt will continue to balloon.

So, let me say what nobody in Congress or the administration has the "profile in courage" to say.  At some point we citizens must shoulder our responsibilities, invest in our children's future, and pay more taxes.  We owe for Iraq and Afghanistan.  We owe for the national security binge since 9/11.  We owe for the stimulus.  We have to make-up for the lost revenue of ten years of the Bush tax cuts.  Program cuts and elimination of waste are all fine to consider-maybe a tariff on Chinese and similar unfair imports might also be fine-but whatever else we do more tax revenue will be required.

The only question is when.  Professor Zampelli is certainly right that the economy is still too fragile for either new taxes or program cuts.  Indeed, additional stimulus measures might be necessary in the near term.  Fair enough.


The day is coming, though, when America must start paying off its national credit card.  Republicans, Democrats, and Tea Partiers do us no favors with their pretense that it will be one Big Rock Candy Mountain.

 

Comments

Matt

Matt wrote on 10/01/10 12:29 PM

But who will vote for a candidate who opposes the Big Rock Candy Mountain?

In all seriousness, though: lawmakers have "learned" from elections that doing difficult things to balance our national budget brings them no rewards -- whether it was the 1990 Bush budget summit which led to a revolt among conservative voters, or the 1993 budget bill which did nothing to stem the anti-Democratic wave of 1994 (and may have even contributed to it). Either the public has to change its priorities, or incumbents have care less about keeping their jobs.

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