Not only do we live in an era of fake news, we live in an era of fake logic. Out of control spenders that gleefully give the rich giant tax cuts financed by foreign borrowing are hailed as conservatives. A bigoted president with a record of over a thousand lies in his first year in office that has had three marriages, has 19 women accusing him of sexual misconduct, supports a perverted pedophile for the Senate and defends a wife beater is hailed as a great Christian by his supporters. So, if you are wondering if down is really the new up and up is the new down, perhaps it is time for a reality check with real data.
Conservatives spend less!
I realize the above subtitle is an amazing assertion. Figure 1 clearly points out, there are some spending consistencies related to political party affiliation. Republicans Reagan and George W. Bush came close to doubling federal government spending in their eight year terms. They increased the budget at roughly 250% of the rate of the Democrats. George H.W. Bush increased the rate of spending more in four years than either Clinton or Obama did in eight years!
This trend of the conservative party continues with the Republican who presently occupies the White House. Even though US defense spending under Obama was larger than the next six largest defense spending countries combined, Donald Trump proposes increasing that by another $195 billion over the next two years.
Breaking campaign promises, Trump proposes big cuts to Medicare and Medicaid. Yup, take money away from the sick and old people. That seems to be the Republican Christian thing to do. Gotta teach those old people responsibility.
Trump proposes spending $1.2 trillion over the next 30 years to upgrade our nuclear arsenal. Yet, North Korea has proven time and again that it doesn’t make any difference how big a nuclear arsenal you have, the real difference is how you use it. On August 8, 2017, Trump stated, “North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen.” North Korean threats have continued, along with more nuclear and missile tests. North Korea called Trump’s bluff.
North Korea has maybe one or two missiles with nuclear warheads capable of hitting the US. Yet, they made Trump look like a drunken polka dancer playing to their tune. The US now has over 4,000 active nuclear warheads. How many more do we need to waste money on to deter the rational and pragmatic leaders Russia and China have?
Conservatives borrow less!
Yes siree! Those Republicans are a frugal bunch indeed! The only thing they seem to enjoy more than spending is borrowing. While they used to accuse Democrats of tax and spend, Republicans’ motto is “Borrow and Spend”.
And, things could have been worse. If George H.W. Bush hadn’t weaned himself of the Republican “deficits don’t matter” Kool Aid and implemented a tax hike in 1990, we could have been put through the same debt induced economic crash his son visited upon us 17 years later.
The amazing story is the turnaround Bill Clinton did during his presidency where we actually paid off debt. Of course, George W. Bush reversed that foolish practice with predictable results.
The present resident of the White House proposes increasing the federal debt by another $194 billion next year and $7 trillion over the next ten years. Yes, in this up is really down world, his supporters actually call him a conservative.
When Congressman Paul Ryan goes through his spiel about how our present safety net programs are economically unsustainable, it would be fun to ask him how fiscally sustainable it is to elect Republicans?
Trade Balances and Foreign Borrowing
A country’s trade balance always equals its net national savings. More technically correct is to say a country’s current account and capital account are always equal.
The US had a -$738 billion net government savings during Obama’s last year in office. This huge negative balance overwhelms our private savings giving us an overall negative net national savings or Capital Account Balance. Currency markets aren’t controlled by anything other than market forces. A big savings deficit means the dollar increases in value making imports cheaper and our exports more expensive. This continues until our trade balance equals our net national savings. Cut off trade with a country like Mexico that we have a big trade deficit with and the deficit just moves to other trading partners.
Figure 3 actually illustrates two things. First is the size of our trade balance and second, how much we borrow from other countries to finance our budget deficit. The net national savings value is also on the Bureau of Economic Analysis site in Table 5.1 Savings and Investment, Line 35.
During the Clinton years, we actually had federal budget surpluses, yet we still had a negative net national savings and trade balances. During those years, consumers added lots of debt. We had a booming economy that attracted foreign investment. This accounted for our savings deficit. Also, we had too much money chasing too few goods. This would normally be a recipe for runaway inflation. Fortunately, foreign trade (imports) were the cure for that problem.
The important point is that the Clinton trade and savings deficits were market driven. A truly conservative government got out-of-the-way of the credit and other markets.
Trump’s proposed huge budget deficits will logically give us a larger net national savings deficit. This will make imports cheaper in the US and make exports (such as agricultural products) more expensive to buyers outside the US as our trade deficit matches the savings deficit. All the trade negotiations and trade delegations that we waste time on won’t affect the driving factor that our Current Account will equal our Capital Account.
Stock Markets Love Republicans!
Well, not really. Republicans continually believe they can buy prosperity. Anyone can figure out from the data above that Republicans use huge tax cuts for the rich along with out of control spending increases to finance a false prosperity like we have now. After several years, the Piper must be paid.
Ronald Reagan came into office in 1981 and his stock market crash came in 1987. The markets recovered by the time he left office. George W. Bush took office in 2001 and we had a false prosperity until 2008 when the markets crashed and stayed that way into Obama’s presidency.
This contrasted with Clinton and Obama whose limited spending increases coincided with drama free market increases. Especially Clinton, who got the government out of the market’s way by balancing the federal budget and provided the conditions for real economic growth.
We are once again living in a false economy fuelled by foreign borrowing. History indicates that recent stock market gyrations are just that. Since we are following the George W. Bush script of huge tax cuts with out of control spending, the real crash may be a few years off.
One of the real hoots I get is reading social media posts that describe Obama as a socialist and a communist! Lots of African along with Central and South American leaders have fit one of those descriptions. None of those socialists/communists presided over a 163% increase in their stock markets, held government spending increases lower than any of their predecessors and kept inflation at the lowest levels ever recorded. Yup, Obama was a unique president!
The interesting thing about this table is that Reagan’s presidency looks pretty good. But, after you add George H.W. Bush’s term in, twelve years of borrow and spend economics leaves you about where things were when Reagan succeeded Jimmy Carter.
Buying prosperity looks good in the short term but Obama and especially Clinton’s true conservatism wins out in the longer haul. If only Republicans could quit criticizing them long enough to learn from the Democrats and mimic their successes.
Figure 5 really doesn’t need much explanation. Obamacare added 27 million uninsured people in what is one of the greatest legislative accomplishments in my lifetime.
One of the Federal Reserve Presidents, Janet Mester, stated last November, “Government needs policies that increase immigration, not reduce it.” Perhaps she was looking at the data in Figure 7 and how it correlates to Figure 6. Arguably, some of the Clinton GDP growth can be attributed to the large increase in immigrants. The much slower growth during the Obama years might also be blamed on the slowdown in immigration.
If we want more economic growth, logically, we want more people. With an aging Baby Boomer population leaving the workforce, the most obvious source is immigrants.
After writing this article, I ask myself why I spent as much time as I did on it. Quite frankly, I don’t expect it will have any impact on Trump supporters. Hopefully, in a world where we are inundated with false hoods, it will provide some fodder for rational people.
After the last election, I wrote in a post that we are two worlds living in one nation. This is even more accurate today.
Since then, I’ve tried to listen a lot. What I have learned is that one of the world’s in our nation differentiates themselves by their ignorance. The strange thing is this is an ignorance of choice.
These folks simply refuse to recognize news organizations with decades and centuries long reputations for accuracy. An article that fails to portray their hero as anything but a great Christian valiantly trying to save the nation after eight years of Obama rule makes that news organization only worthy of their scorn. Even when forced to acknowledge facts, their loyalty never wavers. Trump’s supporters don’t give a rat’s behind about the facts and data in this article. All they care about is that he hates the same people they do as much as they do.
What this reminds me of is a WWII documentary filmed toward the end of the war where a near starving German woman wearing rags in a burned out relic of her city staring down the gun barrel of a US soldier was still proclaiming her loyalty to Hitler.
Hitler’s based his power on appealing to German nationalism and focusing hatred on Jews and any other non-German ethnic group. They, of course, were the cause of all Germany’s problems. For Donald Trump, the same nationalism and racism comes through loud and clear. What I’ve learned from my social media forays is that his supporters have a vitriolic hatred of Blacks, Hispanics and Arabs that meters down to anyone that isn’t white and practicing the same form of Christianity they are. Of course, they aren’t racists (by their own measurements).
Are their similarities? Hitler didn’t have to shut down the media, his supporters did. Hitler borrowed wherever he could to finance his military buildup. He loved military parades and Trump is planning a giant one in Washington this year. Hitler never admitted a mistake. Both shared the same disdain for the truth. Trump wants more money and support for the police.
The most disgusting and despicable comments I’ve ever heard a US president make are Donald Trump’s wanting to know why we allowed people from shithole country’s like Africa, Haiti and El Salvador to come into the US and not allow more immigration from places like Norway. This is my litmus test. Anyone still supporting Trump after those remarks is either a racist or condones racism. I have no use for either.
The scariest part is how the Nazis, oh excuse me, the Republicans rally to Trump’s defense and try to delegitimize the world’s most respected law enforcement agency in their blind loyalty to head off his possible indictment. The summary here is simply this. We need to stand up to this bigotry and hatred of facts. Facts may not impact Trump loyalists, but there is hope for their kids. Rationale people need to unite in the next elections. Roughly 38-40 percent of voters are die-hard Trump supporters. Every one of them will vote. Staying on the sidelines is not an option.