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Deficit Hawkism and National Suicide: Part One

Deficit Hawkism is the ideology that prioritizes bringing tax revenues and Government expenditures into balance ahead of other far more essential national needs and priorities. This “old time religion” used to be the exclusive province of Republicans, and was particularly important in hindering America’s recovery from the great depression of the 1930s and particularly for the do little or nothing activities of the early ’30s that led to the infamous “Hoovervilles,” and other excesses of that period. FDR’s program and the experience of WWII when truly massive deficits finally ended the depression, persuaded most Democrats that eliminating deficits are not a major priority of the Federal Government. However, during the 1970s, President Carter, when running, had criticized President Ford for his failure to control inflation and unemployment. To control inflation, Carter emphasized attempts to balance the budget, prioritizing this ahead of his efforts to reduce unemployment, or pass health care reform, or cope with any other traditional priorities of Democratic Administrations. While he had limited success in both reducing inflation and unemployment, the Democratic Party itself began to emphasize its “fiscal responsibility,” perhaps to align itself with the Administration, and defend itself from Republican attacks on them as the “tax and spend” Party.

When Reagan took over in the 1980s, the emphasis on fiscal responsibility among Democrats increased as they tried to differentiate themselves from Reagan and his deficits, by emphasizing their own conversion to the old-time religion of budget balancing. What an irony! Just when Reagan and the Republicans, practicing “supply-side economics” accepted the notion that controlling deficits was far less important than other priorities, such as cutting taxes, the Democrats were pledging their allegiance to the “old-time” religion, and trumpeting their fiscal responsibility. Prominent Democrats such as Paul Simon, Dick Gephardt, Bill Bradley, Bob Kerrey, and Paul Wellstone, as well as many others, prioritized balanced budgets during the ’80s, and that emphasis continued into the ’90s when the Clinton Administration touted its own deficit reduction efforts. When the Bush 43 Administration arrived, Democrats again found themselves facing a Republican who didn’t worry much about deficits, so they again differentiated themselves from the Administration by emphasizing fiscal responsibility.

And then, September 2008 happened, the banking system fell into crisis, and the economy collapsed leaving the most serious recession since the early 1980s, and perhaps the Great Depression itself. With the collapse of the economy, unemployment rose to nearly 10%, and consumer demand collapsed. It was thought necessary to advance trillions to the financial system, and also to try to stimulate the economy. Both moves involved substantial deficit spending exceeding that of the Bush 43 Administration, and awakening the deficit hawks in the Republican Party like Senators Judd Gregg, Olympia Snowe, Susan Collins, and George Voinovich. The Obama Administration has been able to fight off the Republican deficit hawks by talking about hypocrisy and their silence during the Bush Administration, while also pointing out that the last President to have a surplus was a Democrat named Clinton.

However, the Democrats are in a bad position to defend themselves against deficit hawkism, since for so many years now, they have touted the importance of fiscal responsibility and deficit reduction. So many of the Democrats have associated themselves with deficit hawkism, that as the immediate economic emergency caused by the collapse of the financial system and the stock market both recede, the Democrats are finding it hard to justify continued deficit spending, since, for years, they have railed and campaigned against it.

When we look back at the history of the nation and the Democratic Party, we can see that its embracing of fiscal responsibility and deficit neutrality has coincided with, and, I think, partly explains its failure to serve its historic economic constituencies: working Americans including poor people and the middle class. It’s hard for the Democrats to push through legislation extending safety nets and economic and social democracy, when every advance must be funded by a tax increase or expenditure cut so that it is deficit neutral. It has been hard for them to pass extensions of health care, or education, or infrastructure, or development of new industries, when every advance has to be subject to the priority of a balanced budget. So Democrats run for office by promising various advances to their constituents, but rarely deliver on promises that will cost money because they’ve denied themselves the possibility of having deficits except for “extraordinary” expenditures on wars, anti-terrorist activities, or total financial collapses. For the last 30 and more years they have played the game of politics with one arm tied behind their collective backs, and, in the process, they have betrayed their historic constituencies.

This brings us up to the present and the situation in which the Democrats find themselves. As I’ve said above, some Republicans started playing the game of deficit hawkism last Spring. Judd Gregg opposed the stimulus and actually advocated the Hoover strategy of doing nothing and waiting for the economy to come back. Susan Collins and Olympia Snowe, on the other hand, cooperated with the Democrats and the Administration to craft a stimulus bill, but they used appeals to deficit hawkism to hold down its size, and by insisting on increasing the percentage of the stimulus going to tax cuts, they insured that the already inadequate stimulus would fail to cover employment cuts in State governments, and also have less impact in the areas of infrastructure and public works stimulus.

Now that the economy is back part way, the Republicans, with the behinds of their campaign contributors already covered by the Government, are increasing their calls for fiscal responsibility, and also so-called moderate Democrats and even some progressives, not to be outdone in their obeisance to the old-time religion, are joining them in this effort. The President periodically makes his own obeisance at the altar of the old-time religion, at great cost to the American people. We see this in the context of the health insurance reform bill, where he has made it known that he wants the bill not to exceed $900 Billion in cost over a 10 year period, and that he also insists that it be deficit neutral according to ridiculous and unreliable forecasts over a ten year period by the CBO.

During the past two weeks, we have seen a veritable eruption of deficit hawkism. Just this week, on October 20:

”U.S. Senator Russ Feingold, a member of the Senate Budget Committee, unveiled major legislation today to cut wasteful spending and institute reforms to control spending going forward. The Control Spending Now Act is a comprehensive plan composed of more than 40 separate efforts to reduce the deficit by more than one half trillion dollars over 10 years and institute reforms to the budgeting and earmarking process to prevent wasteful spending in the future. Feingold’s bill will make Congress tighten its belt, crack down on corporate welfare, curb subsidies to big agribusinesses and other private enterprises and cut other wasteful spending on unnecessary projects.”

The week before, on October 14, ten Democratic Senators led by Evan Bayh, and also including: Mark Udall, Joe Lieberman, Mark Begich, Michael Bennet, Dianne Feinstein, Amy Klobuchar, Mark Warner, Bill Nelson, and Claire McCaskill, signed a letter to Harry Reid, calling on him to: support creating “a special process to deal with our nation’s long-term fiscal imbalances,” asserting that these problems can’t be handled under the regular order in the Senate, and that the special process ought to allow “for deliberation and a vote on a comprehensive package addressing these issues.”

The Senators mention other bills that have been introduced by Senators on both sides of the aisle to handle the deficit problem, and provide the following reasons for wanting this special process. 1) CBO forecasts $10 trillion in additional deficits over the next 10 years. 2) The baby boomers are retiring. 3) The American taxpayer (actually the Federal Government) made interest payments of $250 billion in 2008 to creditors. 4) “Long-term deficits will drive up interest rates for consumers, raise prices of goods and services, and weaken America’s financial competitiveness and security.” 5) Such deficits will also rob us of resources we need to invest “in energy, education, health care, and tax relief for small businesses and middle-class families.” And 6) the bigger our deficits, the more we will have to borrow from foreign creditors to finance our massive debt.

Not to be outdone by the Senators, one of the leading deficit hawks in the Press since the 1970s, David Broder, wrote a couple of columns in the WaPo to alert the public about the need for fiscal responsibility. In the first of his columns, he points out the need to shortly raise the debt ceiling, the record deficit of $1.4 trillion, the Republicans poised to shortly “pounce” on the Democrats for their profligate spending, the Democrats answering by pointing to Republican deficits, and Democrats having no choice but to engage in deficit spending because of the mess left by Bush, the possibility that the partisan bickering will result in a bipartisan agreement on the kind of special process called for by Bayh and his nine colleagues, the support of Kent Conrad and the Republican Judd Gregg for such a bill, the notion that an amendment establishing such a process could get a majority vote in the Senate, the fact that Nancy Pelosi is blocking similar action in the House, as well as additional points suggesting that Obama should not wait until next year to put deficit reduction on the table but, in order to avoid another Perot moment, should undertake it now, because: “people understand that we’re stealing from future generations.”

Broder’s second column then emphasized that in spite of Reid and Obama telling Bayh to “cool his jets,” action on deficit reduction may not be able to wait until next year. His evidence is that the Senate by majority vote of 53 – 47 with 13 Democrats joining every Republican, voted against Harry Reid’s attempt to pass legislation avoiding the scheduled reduction Medicare payments to Doctors. This “Doc fix” has a projected cost of $247 billion over 10 years, and Reid wanted to pass it as a separate bill to avoid its being added to the health care reform legislation and busting the President’s $900 billion limit for that bill. After remarking that Reid’s maneuver is the kind of “sleight of hand” used by both parties to “conceal spending.” Broder concludes:

”But this year the public has finally grown alarmed about the debt being passed on to our children and grandchildren. What Bayh and the others who balked at Reid’s effort to finesse the spending issue understand is that time has run out on schemes that perpetuate the dangerous fiscal policies of the past.

”Economic recovery is job one. But budgetary responsibility is job two, and we can’t afford to delay starting on it any longer.”

All this excitement over budgetary responsibility is most impressive, a real display of maturity, realism, moral rectitude, and tough love for the citizens of the United States. It would be even more impressive if the legislators and commentator involved were poor or middle class people who stood to lose out from this insistence on fiscal responsibility after 8 years of funding of George Bush’s tax cuts, wars, giveaways to the health insurance industry, oil companies, and pharmaceutical companies, and bank bailouts. However, since that’s not the case, I hope I will be forgiven for asking whether all this fiscal responsibility is really necessary, or even desirable, until we reach the point where we can forecast likely inflation due to excessive demand for scarce goods? Right now, we can do no such thing. In fact, all we can forecast, as far as the eye can see, is high unemployment rates, ruined careers and lives, and inadequate demand relative to both inventory and productive capacity — precisely the conditions that deficit reduction will only exacerbate.

The frequent calls for fiscal responsibility are justified only by fairy stories propounded by the old-time religion, which are in no way in accord with the way our modern economy and monetary system works. Indeed, an outbreak of fiscal responsibility in the foreseeable future will only promote a much more rapid decline in the economic capacity and prosperity of the United States, will lead to much more open class warfare, and to our de-evolution to the condition of some third world nations. Taking any serious action to reduce Federal Budget deficits in the foreseeable future is a form of slow national suicide, and is entirely inappropriate for Democrats, the so-called party of the people, to even be contemplating, much less agitating for. In my next diary, I will lay out the reasons why, by analyzing the assertions of both Bayh and his compatriots and David Broder, and showing that they are arrant nonsense.

(Also posted at the Alllifeisproblemsolving blog where there may be more comments)

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Joseph M. Firestone, Ph.D. is Managing Director, CEO of the Knowledge Management Consortium International (KMCI), and Director and co-Instructor of KMCI’s CKIM Certificate program, as well as Director of KMCI’s synchronous, real-time Distance Learning Program. He is also CKO of Executive Information Systems, Inc. a Knowledge and Information Management Consultancy.

Joe is author or co-author of more than 150 articles, white papers, and reports, as well as the following book-length publications: Knowledge Management and Risk Management; A Business Fable, UK: Ark Group, 2008, Risk Intelligence Metrics: An Adaptive Metrics Center Industry Report, Wilmington, DE: KMCI Online Press, 2006, “Has Knowledge management been Done,” Special Issue of The Learning Organization: An International Journal, 12, no. 2, April, 2005, Enterprise Information Portals and Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003; Key Issues in The New Knowledge Management, Burlington, MA: KMCI Press/Butterworth-Heinemann, 2003, and Excerpt # 1 from The Open Enterprise, Wilmington, DE: KMCI Online Press, 2003.

Joe is also developer of the web sites,,, and the blog “All Life is Problem Solving” at, and He has taught Political Science at the Graduate and Undergraduate Levels, and has a BA from Cornell University in Government, and MA and Ph.D. degrees in Comparative Politics and International Relations from Michigan State University.