Run! Here Comes The Deficit!

A letter from Rep. Alan Grayson:

A few days ago, I was stuck in the car for a long drive. Because of the complete absence of progressive talk from Orlando’s airwaves, I had no real choice but to listen to the nasal maundering of Mark Levin on the radio. Levin was very upset about the federal deficit.

Interestingly, Levin was a high-level appointee in the Reagan Administration. Dick Cheney, who was Reagan’s Defense Secretary and later the Vice President, said 10 years ago that “Reagan proved deficits don’t matter.”

I must concede that it is rather difficult to reconcile the conflicting statements of these two gentlemen, Messrs. Levin and Cheney. Evidently, they believe deficits are a terrible tragedy when a Democrat is President, and a wonderful gift when a Republican is President.

There has got to be a more objective standard than that.

Here’s one: the federal deficit is a problem when long-term interest rates are high, and not much of a problem when long-term interest rates are low. The Federal Reserve dictates short-term interest rates, but long-term rates still are, pretty much, set by the market, in its usual ruthless fashion. (Which is why James Carville said that after he dies, he “want[s] to come back as the bond market. You can intimidate everybody.”)

When long-term interest rates are high, a federal deficit competes against and “crowds out” private borrowing and investment. When long-term interest rates are low, the federal deficit is not taking away from borrowing by the private sector. On the contrary, the federal deficit is acting as a needed boost to aggregate demand in the economy, an action also known as “fiscal policy.” When the economy is slack, every dollar of reduction in federal spending takes three or four dollars off of our gross national product.

So, by that test, where are we? Well, as I explained last week, long-term U.S. interest rates are at their lowest in history. So what does that tell you about the deficit?

Sorry – I didn’t mention that there was going to be a quiz.

When Ronald Reagan was President, long-term interest rates sometimes exceeded 15% – ten times as high as long-term interest rates today. The market was screaming at the top of its lungs that the Reagan deficit was too high. And today? Silence.

Look around the world. The ten-year note in Greece yields a little less than 30%. Pakistan, 13%. Portugal and Venezuela, 12%. In those countries, the bond market is shouting, “Cut that out!”

Not here.

Thanks to all the deficit-mongering by Mark Levin, Rush Limbaugh, Fox “News,” etc., a lot of Americans are scared by the federal deficit. The advice from Democratic pollsters is to go along with this hand-wringing. But there is an alternative: Explain to the American people when a federal deficit is bad, and when it is not.

Like I just did.

Courage,

Alan Grayson

Welcome To Obama’s America

Yes, welcome to the police state that is America under Obama. What’s that? You thought Bush the lessor was bad on civil liberties? Yeah, not so much. All power corrupts, and absolute power corrupts absolutely. This much is clear. How many times are you Obama apologists going to sit back and ignore the systematic rolling back of our civil rights? Are you so short-sighted that you can’t possibly imagine these powers in the hands of a reactionary Republican president? These are your children’s and grandchildren’s rights being snatched out from under your nose. Where’s the outrage? When is it a convenient time to stand up for what is right? After it’s been made all but impossible to do so? This President ran on a principle of transparency but he’s operated with anything but. Of course it’s hard for some folks to complain from the comfort of their cubicles or corner offices surrounded by Chinese-made trinkets. Keep the people just comfortable enough that they aren’t willing to risk what little they have to exercise their RIGHT to speak out. It’s ok though. You can’t possibly see how this effects you right now so those who are speaking up are just paranoid. Or something.

“Policemen so cherish their status as keepers of the peace and protectors of the public that they have occasionally been known to beat to death those citizens or groups who question that status.” -David Mamet