GOP-Keynesians In Disguise

This was first published in July 2010, when Barack Obama had been in office about a year and a half. I published it again in July 2011. I edited this article a little on October 19, 2018 (mainly the Word History was expanded).

The Republican economic philosophy began its dominance of the last three decades with the election of Ronald Reagan in 1980. That philosophy, sometimes referred to as "Reaganomics," basically consisted of major tax cuts, large expenditures for a military build-up, spending restraint in other areas of the budget, and lots of deregulation of various sectors of the economy.* Reagan, a former "New Deal" Democrat, who frequently quoted Franklin Roosevelt, took over an economy that was sputtering, to say the least. Inflation was high, interest rates were high, and economic activity was, as I said, sputtering, as the country had gone through a recession in the 1979-80 period. President Jimmy Carter, the man Reagan defeated for the presidency, offered an explanation that much of the problem with the American economy had to do with sky high oil and gasoline prices,** which then drove up prices on everything else. While not given much credence at that time, in more recent years, we've seen how high energy prices do indeed effect EVERYTHING else, and thus, our wallets.

During that era, businesses and workers sought to keep pace with inflation, which only caused prices to rise even more. "Cost of living" increases became a common term in many circles (a term still with us today), especially for people on fixed incomes. To put it bluntly, the situation was just plain ugly!

While Carter and "great presidents" are never mentioned in the same breath, he appointed Paul Volcker to be Federal Reserve Chairman. Volcker was one tough cookie, and he steadily raised interest rates to break the inflation spiral, which it did.*** The situation was so out of hand that it was a very painful time for many Americans, and the country slid into a second, more severe, recession in 1981/82, but Volcker's tough medicine worked, and inflation and interest rates both declined over time.

President Reagan and the Republicans (with help from a number of Democrats) pushed through tax cuts early on in his administration. While just about everyone benefited to some extent, the cuts tilted more toward the upper incomes. Military spending marched upward, including on $500 toilet seats.^ The budget deficit soared! Reagan, like his former hero FDR, criticized his predecessor for having run deficits (FDR had criticized Hoover for the same), then turned around and made any deficits run by Carter look like....ah... peanuts! (I couldn't resist that!)^^ It had been the same with FDR, who outspent Hoover many times over, and that was before World War Two caused huge deficits.

Now to the crux of the matter: I'm not necessarily bashing either Reagan or FDR for their overall spending and budget deficits. What is appalling, however, is how supporters of each choose their "facts," preferring to use their quotes, rather than facts and figures from each president. FDR inherited the Great Depression and Reagan took over as interest rates and tight money were being used to squeeze inflation out of the economy, thus bringing on a severe recession (unemployment reached about 11%, and that didn't count those whose hours were slashed, or those who had to go to part time). What is disturbing is, Reagan called himself a "conservative," and successor Republican presidents, and many Republican officeholders, in general, have also touted that terminology since those times. No doubt about it, in about 1983, the economy under Reagan began to roar forward, even more so in his second term, but it was financed by Keynesian economic policy.....deficit spending; that is, huge budget deficits! Reagan's huge military build up played right into having the economy take off, as tanks, guns, planes and ships were produced in great quantity. Americans actually MANUFACTURED things, and what was usually termed "conventional warfare" was still considered the most likely military action back then, so that tanks, planes and such were seen as essential. The money rippled through the economy, helping lower unemployment dramatically by about the midpoint of Reagan's second term. The combination of tax cuts and huge government outlays helped turn the tide of economic decline.^^^ Reagan claimed credit, all the while bashing government and deficit spending. Does this all sound familiar? I'll let you decide for yourself.

Here are the budget deficits for Republican Ronald Reagan (1982-89), Republican George H.W. Bush (1990-93), Democrat Bill Clinton (1994-2001), and Republican George W. Bush (2001-2009). Remember, the Republicans liked/like to toss around the term "conservative." Just a note, each president's calculation starts with their second year in office, as their predecessors actually present the budget for the first year of an incoming president (with some exceptions, which I'll note). Of course, this means that each president's budget extends, by one year, into the next president's term. (I got these numbers from a variety of sources, but mainly from the Congressional Budget Office, or from sources quoting that office. These are in actual dollar amounts, and are NOT adjusted for inflation; so keep in mind, when you see figures from 20 or more years ago, especially, that the amounts would be much higher, if put into today's values.)

Ronald Reagan ran a cumulative budget deficit from 1982 through 1989 of: One trillion, four hundred nine billion +.

George H.W. Bush ran a cumulative budget deficit from 1990 through 1993 of: One trillion, thirty-five billion, six hundred million.

Bill Clinton ran a cumulative budget surplus from 1994 through 2001 of: Sixty-two billion, eight hundred million.

George W. Bush ran a cumulative deficit from 2002 through 2009 of: Three trillion, five hundred forty-four billion +. (Bush's final budget of 2009 had added money from the incoming Obama Administration, so, based on figures I saw attributed to the Bush presidency, and not disputed, to my knowledge, we can subtract about one hundred ten billion from Bush's cumulative number, giving us: Three trillion, four hundred thirty-four billion +.

George Bush (Senior) inherited a hell of a mess from Reagan, something the conservative spin-meisters and Reagan worshipers seldom, if ever, mention. He actually tried to deal with the deficit, including by raising taxes, and he paid a political price during the Republican nominating process, as conservative Pat Buchanan gave Bush a tussle during many of the Republican primaries and caucuses. In the end, though Bush got the nomination for a second term, he was politically bloodied, and vulnerable. He lost to Bill Clinton in the general election (businessman Ross Perot was on the ballot too).


* Reagan made a point to say things like, "Government isn't the solution to the problem, government IS the problem;" and, "Government needs to get out of the way."

** In certain parts of the country, natural gas prices were also extremely high, and some local gas companies made bad deals for high-priced supplies of gas, which then resulted in high prices for customers.

*** While in his early 80s, Volcker is still around as an economic adviser to President Obama, and in my opinion, the President should have taken Volcker's advice on financial reform much more than he did, instead of listening to the Wall Streeters, Summers and Geithner. Volcker advised that traditional banking be separated from investment banking (essentially a return to the Glass-Steagall Act of the 1930s), which would have stopped the big banks from gambling with deposits in risky ventures, and would have scaled back the big banks, taking a big chunk out of "too big to fail." The President chose to listen more to others with much cozier ties to Wall Street bankers. After Obama was elected and was preparing his cabinet picks, I saw some interviews with Wall Streeters who immediately declared Volcker to be "too old." In my opinion, that was just the line they took, as Volcker obviously struck fear into their greedy little hearts, which told me, "This is the guy we want!"

^ Those who lived through those times will remember the outrageous prices being paid for many items, including screws and numerous things, besides the famous toilet seats. The price of the toilet seats prompted someone (I just forget who) to joke, "It gives a whole new meaning to the word 'throne.' " It should be noted that these abuses were not only on Reagan's watch, but had been going on before he took office. For how long? Who the hell knows?

^^ For those unaware, President Carter had been a Georgia peanut farmer, and this fact brought about many a joke.

^^^ When Obama took office facing plunging economic output and surging unemployment, the Democrats in Congress passed a huge "stimulus bill," with only a couple of Republican votes in the Senate (none in the House, if I remember correctly). To have heard Republicans in Congress tell it, the end was near! While I do feel the bill that passed was not fine-tuned enough, for the Republicans to suddenly act as if they were perfect examples of "budgetary responsibility," was total nonsense! (Added 10-19-18: While the stimulus spending may not have been fine tuned, the idea was to get money into the hands of consumers to spend to prevent a deflationary spiral and the descent into a true worldwide depression, with the U.S. leading the way. Ben Bernanke, a Republican, was chairman of the Federal Reserve at that time, and if I remember right, he made statements about 'dropping money out of planes or helicopters' in order to prevent a downward spiral in prices; that is, deflation.)

WORD HISTORY:
Deficit-This word, distantly related to quite a number of words, including to "face" and to "fact," both Latin-derived words borrowed by English, as well as to "do," a word from the Germanic roots of English, is a prefixed word, with the prefix "de" going back to Indo European "de," which meant, "away from, out of, down from." This Indo European form is also the ancestor of "to" in English, and of the forms of "to" in the other Germanic languages, like German, "zu." The Indo European form gave Latin "de," with the same meanings. The main body of the word "deficit" goes back to Indo European "dhe," which had the notion, "to set, to place, to put." This took on an "f" sound in Latin, and it produced "facere," which meant, "to do, to make, to create." The two forms were combined in Latin to make the verb, "deficere," meaning, "to fail, to lack, to be wanting." The third person singular then produced the Latin noun "deficit," meaning, "a lack of, a deficiency, a shortage." This passed into Latin-based French as "déficit," and English borrowed the word from French, in the latter quarter of the 1700s, primarily as a financial and accounting term.