Calling It Like You See It

Barry Ritholtz pulls no punches on the sudden crusade for deficit reduction after eight years of Bush's profligate spending.

While a few honest deficit hawks are out there — the Peterson Institute is a good example of a group looking at long term structural issues, not immediate fiscal concerns — the vast majority of born again fiscal hawks are political hypocrites. They voted for all manner of budget busting programs — unfunded tax cuts, new entitlement programs (i.e., prescription drugs), an expensive war of choice (Iraq).

How is it that they only learned of the evils of deficits after they lose power? How very convenient.

The current group of anti-deficit spenders are pro-cyclical, rather than counter-cyclical. This means that during an expansion, they have no problem with expanding deficits, running big spending programs, giving generous tax cuts. During a recession is where they suddenly rediscover fiscal prudence.

This is ass backwards. During an economic expansion, with employment gaining and GDP growing is when you should be thinking about saving for the next rainy day. Counter-cyclical spending means that governments should watch the budget carefully during the good times, but spend spend more freely during the downturns. What we are hearing from this crowd is the exact opposite of what should be.

It's exactly what Clinton did:  balancing the budget during the dot-com boom.  When that turned into the dot-com bust, Bush did actually do what was necessary and spent into the recession in early 2001.

Then we decided to throw away $3 trillion plus on Iraq and Afghanistan, another $1.2 trillion on the Medicare drug benefit, and another couple trillion or so on Bush's tax cuts for the wealthy as the economy recovered in 2003 to 2007.  Bush more than doubled the national debt and THEN he got us into a massive recession.  Now we need to turn to the government to spend to replace the lost spending from the disaster Bush helped to create, and the GOP (and more than a few idiotic Dems) refuse to let it happen, the hypocrites.  Barry sums it up:

There are few things more annoying the a drinker who just discovered sobriety: Hence, those who have spent the past decade getting drunk on government spending are now suddenly proselytizing a belated sobriety. These calls are occurring exactly when government largesse would do the most good.

I can’t tell what motivates these new deficit hawks — are they merely ignorant, unaware of the historical analogs? Or are they hoping for another recession as part of a debased power grab? (I don’t know).

What I am sure of is that calling for fiscal temperance RIGHT NOW is essentially calling for another recession . . .

And if Obama falls for their advice, cutting government spending right now, we will slam into another downturn.  That's a guarantee.  His econ team should be smart enough to see that.  Apparently they're not.

I'm praying Obama is.  His deficit cutting commission continues apace.  Whether it's a mummer's show or a serious blow, the framing of the debate has already been settled:  Obama has admitted that government spending during a recession is a problem.  It's only a win here for the GOP from this point:  they can continue to attack Obama for not cutting spending fast enough no matter what happens.

I'm begging you, Mr. President, don't fall for it.