CAUTION: ROUGH ROAD AHEAD—BUDGET BALANCING IN PROGRESS

As the Washington merry-go-round proceeds along its rosy, cheerful way towards resolving the perceived budget crisis the nation faces, I am reminded of the ubiquitous signs one sees in road rebuilding season or occasionally near other government projects.

They usually read TEMPORARY INCONVENIENCE—PERMANENT IMPROVEMENT

However, in light of the proposed solutions floating around or synthesized by the likes of Paul Ryan, and his own roadmap presented by President Obama yesterday, I’m not so certain the signs for this project shouldn’t read PERMANENT INCONVENIENCE—TEMPORARY IMPROVEMENT

My reason for suggesting this is simple. Many of the causes for the current budget deficit and increased national debt are not even being considered in discussing solutions.

Here’s a story from the Washington Times reporting on the release yesterday of the Congressional report on the financial crisis.
http://www.washingtontimes.com…-collapse/

This is the lead paragraph:

The Wall Street financial crisis of 2008, which led to the deepest recession since the Great Depression, might have been prevented if not for business and regulatory corruption, according to the most extensive congressional investigation to date.

This story highlights the parts that Goldman Sachs and WAMU in particular played, especially with the former selling shaky mortgages to uninformed investors and then betting for the mortgages to fail, a win-win situation for Goldman if ever there was one.

This is another article from the New York Times giving wonderful background on the failure to criminally prosecute anyone for all kinds of financial hijinks that largely led to the financial crisis that erupted in the final two years of the Bush Administration.

http://www.nytimes.com/2011/04/14/business/14prosecute.html?pagewanted=1&_r=1&nl=todaysheadlines&emc=tha2

What’s really striking to me about these two stories is that while they should be big news, the import of them seems lost on our leaders dealing with the budget.

Sleeping somewhat fitfully, I turned on my TV early this morning and flipped through the channels till I hit CSpan. Now either our Congressmen are pulling all-nighters or this was a repeat from yesterday, but the House Budget Committee was meeting in open session.

Therefore I was able to observe a number of members on both sides pitch some opinions and ask questions of Boy Wonder Paul Ryan.

Among other remarks, Ryan expressed how he envisioned the effect of revisions of the tax code on how much taxes the rich would pay. As he explained it, by eliminating deductions and loopholes and lowering the highest rate to 25%, the rich would actually pay more into the pot.

Then he continued with the standard line that giving the rich more money lets them create jobs. He also said, if memory serves correctly, that after the two rounds of Bush cuts the economy was just humming along and jobs galore were created until, all of a sudden, the edmocrats took over Congress in 2007 and then all that good work went down the toilet.

There his credibility plummeted to zero, because there was little that a Democratic Congress would have even had the time to do that would affect the economy when the housing collapse reared its ugly head.

So no matter how persuasive his argument at first appeared to be, his unrealistic view of the causes of the recession completely undermined his contention that tax cuts to the wealthy creates jobs. In fact, Bush saw no great wave of job creation that was the reality under Clinton with tax hikes.

Now Bush did have the aftermath of 9/11 to contend with, but even if you generously allow that his job growth record would have doubled save for that catastrophe, he still would have added just over one-fourth the number of jobs added under Clinton.

There was some other back and forth among the committee members, some of the Democrats of course opposing changes in Medicare, at least as offered by Ryan. I felt, though, that there was at least some inference that these changes would affect current recipients. They would not and that is a personal concern as I am under Medicare.

Ryan also continued to cite how the President’s own deficit reduction commission recommended such treatment of Medicare and some other favored programs. However, he utterly ignored mentioning that same commission’s recommendation of increased taxes as part of the solution to deficits.

And the fact that his plan still does not eliminate deficits or erase the national debt until 2063 at the earliest, was glossed over by all members speaking on that aspect.

Ryan also deferred to the House Ways and Means Committee about specifics of any real tax reform, as that is their bailiwick.

But as these other reports and stories surface it is amazing that Congressional leaders, possibly of both parties, are acting in a vacuum on these budget issues when there causes for the ballooning deficit and debt traceable to earlier tax cuts with no resultant job growth folowing by the initiation of two costly wars, followed by the failure of regulators (not Reg-ulators) to take action that would have prevented the housing and Wall Street crises, to both the TARP and Stimulous plans being adopted to relieve the pressure from these crises.

TARP has been much more successful than many would have thought possible and the Stimulous, while not wildly successful, still played a large part in the recovery to date.

While balancing the budget and paying down the national debt are ideals to be admired, attempting to fulfill them requires understanding of the context of how and why they balloooned in recent years.



So it seems to me that the emphasis in budget cuts where they have been placed, targeting NPR and Planned Parenthood and Pell Grants for college students and other educational initiatives plus the big boys of Medicare and Medicaid, fails to take into account how these other events shaped both the Recession and the federal budget crisis we now face.

Frankly, the more I delve into this the less I am certain we have a budget crisis that requires solutions. At best the solutions offered will provide merely a temporary respite from our alleged fiscal woes.

In actuality the potential  long term efficacy of these solutions will be shallow at best. The very solutions themselves, I fear, will activate worse problems in the future that will require another round of solutions that will prove equally as ineffective.

It is akin to repairing a bridge with holes in its deck and a rusting superstructure with a thin layer of blacktop and a fresh coat of paint, and the engineers who prescribed that solution never having to drive over it.

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