Washington – The news out of House Speaker John Boehner's speech to the New York Economic Club was his demand for “cuts of trillions, not just billions” before the debt ceiling can be raised. Not just broad deficit-reduction targets, the Ohio Republican insisted, but “actual cuts and program reforms.”
That's alarming enough. It is all but impossible to get this done in the available time. It certainly can't be accomplished on Boehner's unbending, no-new-taxes terms. And if the speaker truly believes that it would be “more irresponsible” to raise the debt ceiling without instituting deficit-reduction measures than not to raise it at all, we're in a heap of trouble.
Even more alarming, because it has consequences beyond the debt ceiling debate, is the incoherent, impervious-to-facts economic philosophy undergirding Boehner's remarks.
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Reporters naturally tend to ignore this boilerplate. Journalistically, that makes sense. Boehner's economic comments were nothing particularly new. Indeed, they reflect what has become the mainstream thinking of the Republican Party. But that's exactly the point. We become so inured to hearing this thinking that we neglect to point out how wrong it is.
My argument with Boehner is not that he believes in a more limited role for government than I do, that he is more skeptical of government intervention and regulation, or that he is more worried about the economically stifling implications of tax increases. Those are legitimate ideological differences. American politics is better off for them.
I'm talking about statements that are simply false.
(BEG ITAL)”The recent stimulus spending binge hurt our economy and hampered private-sector job creation in America.”(END ITAL)
Reasonable economists can disagree about the effectiveness of the stimulus spending and whether it was worth the drag of the additional debt, but no reasonable economist argues that it hurt the economy in the short term.
The Congressional Budget Office estimates the stimulus added, on average, about one percentage point annually to economic growth and reduced the unemployment rate by half a point between 2009 and 2011. And that's the low-end estimate. The high-end numbers show the stimulus spending adding 2.7 percentage points annually to economic growth and cutting the unemployment rate by 1.2 points.
CBO is not alone. Economists Alan Blinder and Mark Zandi estimated in a July 2010 paper that without the stimulus spending, the unemployment rate would be 1.5 percentage points higher.
(BEG ITAL)”The massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes.”(END ITAL)
Crowding out occurs when government spending drives up interest rates and makes borrowing unattractive to the private sector. As economist Joseph Minarik of the Committee for Economic Development explains, “When interest rates are on the floor, you can't say federal government borrowing is crowding out business investment.” The lackluster investment climate reflects low consumer demand and underutilized capacity.
(BEG ITAL)”The truth is we will never balance the budget and rid our children of debt unless we cut spending and have real economic growth. And we will never have real economic growth if we raise taxes on those in America who create jobs.”(END ITAL)
Never? Under President Clinton, taxes were raised, primarily on the wealthy. During the eight years of his administration, the economy grew by an average of close to 4 percent.
(BEG ITAL)”I ran for Congress in 1990, the year our nation's leaders struck a so-called bargain that raised taxes as part of a bipartisan plan to balance the budget. The result of that so-called bargain was the recession of the early 1990s. It wasn't until the economy picked back up toward the end of that decade that we achieved a balanced budget.”(END ITAL)
Boehner blames the budget deal for tanking the economy, but the recession actually started in July 1990, two months before the agreement was reached.
(BEG ITAL)”A tax hike would wreak havoc not only on our economy's ability to create private-sector jobs, but also on our ability to tackle the national debt.”(END ITAL)
During the early 1980s, taxes were cut and public debt ballooned, from 26 percent of GDP in 1980 to 40 percent by 1986. In 1993, taxes were increased (and spending cut); debt as a share of the economy fell, from 49 percent to 33 percent. In 2001 and 2003, taxes were cut. By the time President Obama took office, debt had climbed to 40 percent of GDP.
Listening to Boehner, I began to think the country suffers from two deficits: the gap between spending and revenue, and the one between reality and ideology. The first cannot be solved unless we find some way of at least narrowing the second.
Ruth Marcus' email address is ruthmarcus(at symbol)washpost.com.
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