Re: Jim de Bree, “Are There Any Deficit Hawks?” commentary, Jan. 26.
Well, Jim, how about this? Supply side, saltwater, or Keynesian fiscal theory postulates that engorging the money supply causes a destination for the economy that stimulates growth, borrowing/mortgaging the nation to provide ongoing demand that consumers and businesses will satisfy. I know, I know… Keynesian theory is most often classified as demand side, but in certain fiscal policy instantiations, the charade of tax cutting and deficit spending is Keynesian at its core. It is a higher-risk bet than a conservative fiscal policy, but are there any effective, proven alternatives that will maintain and advance the wide, complex initiatives that the U.S. pursues?
The most oft-cited example was the combination of tax cuts and deficit spending Ronald Reagan put in place to put the last nail into the Soviet Union’s coffin, borrowing and spending, putting cash into businesses’ and consumers’ pockets, thereby flaring the U.S. economy. It demonstrated to Soviet citizens that its politburo-run industry could not compete with the democracy of American cash. Does anyone else recall how those citizens’ most prized black market possessions were Levi’s blue jeans?
After the USSR was liquidated, the U.S. reaped a long-sought “peace dividend” from reduced spending on Cold War initiatives. That helped Bill Clinton to become the only modern president to deliver a surplus (~$300 billion) at the end of his service, evidence that Reagan’s strategic investment/mortgage paid off. Though the Clinton surplus is debated to this day, comparative analyses do not disagree that the bipartisan habits of deficit spending to achieve primary U.S. objectives is not.
To say we are in unusual times is an understatement, but hyperbole and panicky rhetoric are pointless. Though I do not disagree with Jim, particularly regarding politicians and their recharacterization rhetoric, I do observe that even the sharpest-eyed hawks know when to guard their nest and nestlings. If caution for the future requires an investment, and if that investment draws from the far future to assure the near future, then so be it. One other possible path is through sacrifice, thrift and humility.
I observe that our economic culture pursues those virtuous attributes in the background at the same time that their polar opposites — abandon, splurge and pride — are raging in the foreground.
What a place! “We are All Keynesians Now.”