"Voodoo Economics" Redux

As reported in the Boston Globe, the current Administration's plan to increase spending, lower taxes, and reduce the federal deficit just doesn't make sense.

The article comments:

"The analysts said Bush's commitment to lowering taxes while expanding large parts of the budget makes it impossible to meet his deficit-reduction goals. The White House budget office acknowledged that Bush's next budget proposal, to be filed in February, will not include costs associated with his plan to partially privatize Social Security, a move that could cost $2 trillion.

"Politicians love to promise higher spending, lower taxes, and a reduced budget deficit, but those three goals are incompatible," said Brian M. Riedl, lead federal budget analyst at the Heritage Foundation, a conservative think tank."

Unfortunately, the scenario is much the same as the "Reagonomics" practiced by then President Ronald Reagan. According to this BBC article on that era:

"Mr Reagan believed that getting the government out of the lives of its citizens as much as possible would boost economic growth.

He pushed for tax cuts, especially for the rich, on the grounds that giving them greater incentives would stimulate risk-taking and entrepreneurship.

His advisers believed that the additional economic activity would actually boost tax revenues.

However, his parallel commitment to fight communism led him to propose a vast increase in military spending, draining the public purse.

The result was a burgeoning budget deficit which worried conservative Republicans as much as Democrats."

Ironically, this caused an increase in interest rates (note the recent FIFTH increase in interest rates this year), and an ultimate recession with terrible balance of trade results (note the recent report on the American trade deficit hitting a record $55.5 billion). Ironically, it was George W. Bush's dad, George H. W. Bush who labeled this economic theory advocated by President Reagan, and adopted by George W. Bush, as "voodoo economics."

Today, President Bush kicks off an economic summit to cheerlead his reckless economic activity. As reported in Bloomberg:

"Bush probably won't hear anything new or critical at the conference, said Jay Bryson, global economist at Wachovia Corp. in Charlotte, North Carolina. It's ``hard to imagine that people with different views will be invited,'' he said in an e-mail. ``My sense is that there is some skepticism'' about the value of the conference

This President likes to surround himself with those who are in agreement with his ideas. I recall all of those Presidential rallies where loyalty oaths were required to attend! THAT is how this President makes decisions.

But his team remains optimistic. As his Treasury Department representative related:

Bush's goal of reducing the deficit in half in five years will be reached, said Richard Clarida, the Treasury Department's chief economist until 2003 and now chief economic strategist at the Clinton Group Inc., a hedge fund based in New York. ``Economic growth will generate additional tax revenues, and it's important to continue the spending discipline.''

But things have never looked more bleak for the budget deficit. As was reported:

The U.S. saw four consecutive years of surpluses from 1998 to 2001 and has had deficits every year since. Democrats blame Bush's $1.85 trillion in tax cuts over 10 years.

``You don't borrow your way into prosperity,'' said Alan Blinder, who was Federal Reserve vice chairman under President Bill Clinton.

You see John Kerry did vote for the $87 billion in supplemental spending first, WHEN THEIR WAS FISCAL DISCIPLINE TO PAY FOR IT! He only opposed it because of the massive deficits that are being created by this reckless Administration intent on bankrupting America to the tune of TRILLIONS of dollars.

As reported:

"Kerry was referring to a measure he co-sponsored that would have provided the $87 billion while also temporarily reversing Bush's tax cuts for those making $400,000 a year or more. That measure was rejected 57-42."

Our country needs John Kerry now more than any time in its history. He should have been elected in 2004, but we shall have to wait and press ahead with 2008 for Kerry!

Bob