When Government is Handy

If you are interested in the dreary aspects of bank bailouts and the like, you can track the numbers on a website maintained by the Real Economy Project of the Center for Media and Democracy (link). The site tracks expenditures by the Federal Government under the Troubled Assets Relief Program (TARP). The data are updated monthly. Significant detail, by agency, program within agency, purpose, and progress toward repayment are posted there. The data shown are peer-reviewed by economists at the Center for Economic and Policy Research. These are pretty good numbers, not rant-hype.

I am showing here a kind of summary as of July 2011:

What this graphic shows is that in a period of about two-and-a-half years the federal government disbursed or made available in other forms nearly $4.8 trillion in various ways to keep the financial system from collapsing. Of that total $3.2 trillion has been paid back (or the government liability has been removed), leaving $1.5 trillion still owing to the public.

Brutal barbarian that I am, I favored, back then, letting the too-big-to-fails fail rather than vast bailouts. Yes. That would have threatened at least a portion of our life-savings; we lost a good third of them anyway. I also think that the sky would not have fallen if Goldman, Merrill, AIG, and all the rest of the “exposed”—exposed to the mortgage crisis—had joined Enron in falling over the cliff. The responsible speculators would have lost a little of their wealth as well. Not this way.

In any case, when things to really sour, Government turns out to be handy. But when it comes to bailing out the speculators, nobody is talking deficits. But the government doesn’t just happen to have nearly $5 trillion of cash lying around idle. Therefore these bailouts had to come from somewhere. They were borrowed. So who caused the deficits? Was it Government or was it the venal private sector?

Our national “dialogue” has turned stark crazy. We can’t pay our FAA inspectors. We’re thrilled over trillion-dollar cuts to basic programs for the little people. But this morning’s New York Times tells me that even with huge mark-ups, luxury goods marketers can’t keep their shelves stocked because demand for luxury goods is soaring. How about a pair of Christian Louboutin “Bianca” platform pumps for $775? And hurry, please, I don’t want to keep the limo waiting. You know the problems one has with domestic help these days…

A Clash of Philosophies

August 2 and soon a Senate vote will lift the ceiling. Throughout this surreal crisis, I’ve been presenting the simple facts and trying to say, directly or by quoting others, what the simple truth of the matter is: revenues fall short of expenditures.

That’s the technical expression of it. The more basic problem has been philosophical (as always). We’re engaged in a massive clash of cultures. One side views government as if it were something not only external to the collective but, in addition, something evil. The other still operates on the assumption that government is simply one aspect of the collective life. Neither side is able to muster the necessary and overwhelming majority required to carry out its agenda. As a consequence we’re forced to undergo surreal crises, one after the other. The by now traditional left (traditional because it reflects humanity’s long-term collective experience—namely that government is here to stay) cannot pass effectively legislation to match modern ways of governing populations by providing them basic human rights—such as effective health care. The reactionary right cannot shed its love-affair with global power which demands abnormal expenditures on the military. It does not have the real power to cut budgets. It must reach for indirect tools to create crises. The first to discover that separating revenue on the one hand and its complement, expenditures or outlays on the other can create massive deficits was President Reagan. He thought that that would work in due time to shrink government. But that didn’t work. Now we’ve progressed to the next stage—creating deficits but trying by law to prevent their funding by borrowing.

What the Right has managed to achieve is to stop revenues growing alongside expenditures. We are thus supposed to solve our problem by breathing out—but never breathing in. Doesn’t seem to work. The problem is that the collective includes government, and if government is supposed to die, the collective will also suffer.

Herewith some charts to make the point once again.

Note here that revenues and outlays nicely match each other (not perfectly but closely, from 1950 through 1981, Reagan’s first year in office. Thereafter the gap widens with a brief interruption during Clinton’s second term. Then deficits start growing as two events coincide—the war on terror and further drastic tax cuts under Bush. Next comes the mortgage meltdown, more war, and the very weak presidency of Barack Obama.

This chart shows the percent that deficits and surpluses represent of outlays. In this 62-year period, we only experienced eight years of surplus. In the first 25 years of this period, the deficit stayed below 10 percent of outlays in all but three years. In the 1980s and forward, the deficit bars dip lower except under one president, Clinton.

Evidently we will keep spending. But the Right’s view is that spending is only legitimate on military budgets. Militarism has killed just about every culture on record. To load that burden on the weakest elements of the collective—the children and the elderly—is not just surrealism. It’s crazy.

Data for the graphic are from the Office of Management and Budget here, Table 1.1.