By Noam Chomsky
The deficit crisis is largely manufactured as a weapon to destroy hated social programs on which a large part of the population relies. Economics correspondent Martin Wolf of the London Financial Times writes that “it is not that tackling the US fiscal position is urgent…. The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 percent, as the few non-hysterics predicted. The fiscal challenge is long term, not immediate.” Very significantly, he adds: “The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4 percent of GDP in 2011, far below their postwar average of close to 18 percent. Individual income tax is forecast to be a mere 6.3 percent of GDP in 2011. This non-American cannot understand what the fuss is about: in 1988, at the end of Ronald Reagan’s term, receipts were 18.2 percent of GDP. Tax revenue has to rise substantially if the deficit is to close.” Astonishing indeed, but it is the demand of the financial institutions and the super-rich, and in a rapidly declining democracy, that’s what counts.
Though the deficit crisis is manufactured for reasons of savage class war, the long-term debt crisis is serious, and has been ever since Ronald Reagan’s fiscal irresponsibility turned the US from the world’s leading creditor to the world’s leading debtor, tripling national debt and raising threats to the economy that were rapidly escalated by George W. Bush. But for now, it is the crisis of unemployment that is the gravest concern.
The final ‘compromise’ on the crisis – more accurately, a capitulation to the far right – is the opposite of what the public wants throughout, and is almost certain to lead to slower growth and long-term harm to all but the rich and corporations, which are enjoying record profits. Few serious economists would disagree with Harvard economist Lawrence Summers that “America’s current problem is much more a jobs and growth deficit than an excessive budget deficit,” and that the deal reached in Washington in August, though preferable to a highly unlikely default, is likely to cause further harm to a deteriorating economy.
Conservatives hilariously exclude Reagan from the pattern of presidents who accepted a government role in the economy. Conservative mythology insists that Reagan must always be correct, so he is lauded for rejecting the twentieth century model of government, even though Reagan very much accepted the broad contours of the post New Deal state. Indeed, Reagan liked to boast that he voted for Franklin Roosevelt, and that the Democratic Party only went wrong sometime after FDR passed from the scene. Reagan trimmed government but he never even attempted to fundamentally challenge the basic role of government in regulating market failure or providing medical care to the poor and elderly.
Barack Obama, 1.2% annual G.D.P. growth rate (previously 1.5%)
George W. Bush, 1.6% (previously 1.7%)
George H.W. Bush, 2.1%
Gerald Ford, 2.2%
Dwight Eisenhower, 2.5%
Richard Nixon, 3.0%
Jimmy Carter, 3.2%
Ronald Reagan, 3.5%
Bill Clinton, 3.8%
Lyndon B. Johnson, 5.0%
John F. Kennedy, 5.4%