The seeds of this crisis were planted long ago, by previous generations. Our parents and grandparents had noble aims. They saw poverty among the elderly and created Social Security. They saw sickness and created Medicare and Medicaid. They saw Americans struggle to afford health insurance and embraced health care reform with subsidies for middle-class families. But this expansion in government did not come cheap. Government spending has taken up an increasing share of our national income.... If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided. But no one likes paying taxes. Taxes not only take money out of our pockets, but they also distort incentives and reduce economic growth. So, instead, we borrowed increasing amounts to pay for these programs. Yet debt does not avoid hard choices. It only delays them. After last week’s events in the bond market, it is clear that further delay is no longer possible. The day of reckoning is here....
Brad DeLong is having none of it.
It is important to notice that when Greg Mankiw writes "if we had chosen to tax ourselves..." and "they saw sickness and created Medicare..." and "we borrowed increasing amounts..." he is talking about himself and his fellow budget arsonists. He is not talking about President Clinton, Clinton's appointees, and Clinton's supporters--they sweated blood to cut spending below and raise taxes above the baseline and actually balanced the budget. He is not talking about President Obama, Obama's appointees, and Obama's supporters--Obama's excise tax on high-cost health plans and the supermajority entrenchment of the Medicare cut recommendations of the Independent Payment Authorization Board are--if they are not repealed--the largest acts of fiscal responsibility ever undertaken in America.
Mankiw is talking about President Reagan, his supporters, and his appointees. Mankiw is talking about President George W. Bush, his supporters, and his appointees. And--as one of George W. Bush's cabinet-level appointees, Chairman of the Presidents Council of Economic Advisers in 2003-2004--he is talking about himself.
Is it too much for me to expect, from him, an apology to America? A whispered: "I am sorry"? An admission that the unfunded 2001 tax cuts that he cheerled for were a mistake, and that we as a nation would have been better off had they not been passed? An admission that the unfunded 2003 tax cuts that he cheerled for were a mistake, and that we as a nation would have been better off had they not been passed? An admission that the unfunded 2003 Medicare Part D prescription drug benefit that he cheerled for was a mistake, and that we as a nation would have been better off had it not been passed?
Is that too much to ask?
Indeed. The biggest single contributor to our deficit in the future is the Bush tax cuts...tax cuts which only served to create the housing bubble and transfer of wealth upward that eventually led to the financial crisis of 2008. That, along with the Medicare Part D spending, is what in the space of a decade wiped out the Clinton surplus and put us in a massive hole.
To repeat, we had a balanced budget under Clinton. Then the Republicans happened. Then the budget arsonists burned our country down. "We're running a surplus. We need to give that money back to the American people." They did and then some, to the tune of trillions and trillions. Obama didn't create the Greenspan housing bubble, or the tax cuts, or the Medicare giveaway. But now he has to clean it up.
Or he would, if the Republicans would let him. But they don't want him to. Instead, Republicans are happily saying that if we make massive cuts in government spending -- and cut hundreds of thousands of government jobs as a result -- the private sector will magically create more jobs as higher unemployment will drive down wages, freeing up capital to create more public sector jobs.
Or, if we go back to our budget arsonist theory, quite literally they mean setting an unemployment wildfire will mean brisk additional business for fire hose manufacturers, industrial cleaning companies, landscapers and foresters, and building contractors. We'll get back those eight million jobs or so lost in the last 3 years, only the wages paid for those jobs will be significantly less, and that's a win for America's businesses!
For the American worker, not so much.
And yes, the Republicans are now saying that in order to create jobs, significantly higher short-term unemployment through the destruction of thousands of jobs in order to replace them with a larger number of crappier, lower paying jobs is exactly what America needs right now.
Of course, the problem is many Republicans believe exactly this.