Hey Wisconsin, Remember the Fear of Zero National Debt

As Gov. Doyle grapples with the giant budget deficits, it's worth recalling a time when zero national debt was feared and states argued about how much fiscal revenue they should shave off their budgets.

In 2001 Fed Chair Alan Greenspan testified before the Senate Budget Committee on the potential dangers of having no federal debt [we're at $11 trillion now], a fiscal legacy of the Clinton administration that Bush, Cheney and his rightwing ideologues were desperate to avoid.

It was an ambiguous and wide-ranging testimony, recounted by Treasury Secretary Paul O'Neil in The Price of Loyalty, that included Greenspan's "fear that large surpluses would create a drag on the economy," among other expressed cautions and concerns about the then-proposed Bush tax cuts (O'Neil p. 63).

But the damage was done and Greenspan gave political cover (then and in later statements) to the reckless Bush tax cuts for the super-rich.

Said Greenspan in his subsequent testimony before the House Committee on the Budget (March 2, 2001):

At zero debt, the continuing unified budget surpluses now projected under current law imply a major accumulation of private assets by the federal government. Such an accumulation would make the federal government a significant factor in our nation's capital markets and would risk significant distortion in the allocation of capital to its most productive uses.

A significant distortion?

The GOP commitment to make a fiscal mess of things is long-standing, notes Joe Conason in Salon today, and "and Republicans who are complaining about Barack Obama's spending are hypocrites," and avoid even addressing the arguments for stimulus spending (see Krugman, Dec. 1, 2008). Writes Conason

In our time, the Republican Party has compiled an impressive history of talking about fiscal responsibility while running up unrivaled deficits and debt. Of the roughly $11 trillion in federal debt accumulated to date, more than 90 percent can be attributed to the tenure of three presidents: Ronald Reagan, who used to complain constantly about runaway spending; George Herbert Walker Bush, reputed to be one of those old-fashioned green-eyeshade Republicans; and his spendthrift son George "Dubya" Bush, whose trillion-dollar war and irresponsible tax cuts accounted for nearly half the entire burden. Only Bill Clinton temporarily reversed the trend with surpluses and started to pay down the debt (by raising rates on the wealthiest taxpayers).

As is clear among honest observers, among the pathological programs pursued by the Bush administration was its enterprise to turn the national debt from prospects that were made in 2001 of the debt being completely paid off in 10 years to upping the debt to $10 trillion when it left office.

The wish list that the rightwingers, like Grover Norquist, desired from the future administrations dealing with the massive debt: Eliminating those awful programs like Social Security and Medicaid and Medicare which they hoped would become unsustainable because of the debt purposefully piled up by Bush and Cheney.

Bush bequeathed more than that: Millions of jobs shipped overseas, $trillions of unregulated financial products that may yet cost the dollar its role as reserve currency, states' deficits like Wisconsin's and on and on.

Obama has been scrupulously careful not to put the blame on the GOP; it's the wrong message for the guy sent in to clean up the mess. But Conason, Krugman and others should continue to further an understanding of the political-economic commitments of the GOP.

- See also Krugman: Large fiscal expansion needed (Dec. 1, 2008)