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Monday, Sep 03 2012 11:00 PM

Budget deficits: This stuff isn't rocket science

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    Mark Martinez

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By MARK MARTINEZ

Several weeks ago, I wrote here that we need to abandon the Republicans' "tax cuts for the rich" policies. The promise that putting more money in the hands of America's wealthy will "trickle down" in the form of greater prosperity has only brought us more debt and a collapsed economy in 2008.

I noted how policies associated with trickle-down overemphasize tax cuts as a motivator of the human condition and explained how economic growth and the human spirit are driven by many factors beyond tax breaks. But you wouldn't know this was my argument if you read the responses from two of The Californian's readers.

Going off topic, both attempted to explain why trickle-down economics works. One opened by focusing on my opening analogy rather (lost Japanese soldiers) than the "moral of the story" (as it were), while the other meandered through a staggered series of ill-connected employment, tax receipt and jobs statistics.

Neither discussed how trickle-down policies are tied to surging debt numbers, the 2008 market collapse and collapsed middle-class incomes today.

Let's cut to the chase. What happened to our nation's budget with and without trickle-down policies?

* President Reagan effectively tripled the debt with it: $950 billion to $2.7 trillion.

* President George W. Bush almost doubled the debt with it: $5.7 trillion to $10.6 trillion.

* Without it, President Clinton stemmed the debt tide -- $4.1 trillion to $5.7 trillion -- and left budget surpluses in 2001, with $5.6 trillion in projected surpluses by 2011.

So, yeah, the budget record under tax breaks for the rich sponsored by trickle-down policies stinks. Ignoring this reality is what trickle-down supporters have been doing for years.

Like those who selectively quote from the Bible to create a facade of spirituality, trickle-down disciples draw from minute and ill-connected employment, GDP and tax receipt numbers over different periods to make it appear there's an economic halo over trickle-down. There is not. Focusing on specks of economic data in the eye while ignoring the planks of debt in your own eye is no way to discuss our nation's debt challenge.

Behind the proselytizing of our trickle-down prophets is one simple reality: Budget deficits soared with trickle-down policies. Budget surpluses emerged when they were abandoned (yes, I have to repeat this point). But wait, there's more.

A core belief of our trickle-down fundamentalists is the notion that the economy recovered under Reagan primarily because of market-supporting, deregulation-soaked, trickle-down policies. The evidence suggests otherwise.

On the inflation front, Reagan benefited from Federal Reserve Chairman Paul Volcker's stubborn interest rate hikes, which put a damper on consumer spending.

It's interesting to note that Volcker was appointed by President Carter, then reappointed and effectively "fired" by Reagan (who brought in Alan "Bubbles" Greenspan).

Reagan also benefited from a drop in oil prices in the 1980s, which helped reduce costs all around. Prices dropped in part because of a series of conservation policies initiated by Presidents Ford and Carter, which Reagan famously opposed. Further driving oil prices down were new energy sources and breaks in OPEC unity -- facilitated by the Iran-Iraq war, which the Reagan administration did encourage (and helped fund) -- which led oil-producing states to undersell each other.

Finally, at a time (1981-1989) when our nation produced about $4.2 trillion in goods each year, Reagan dumped almost $2 trillion in borrowed dollars into our nation's economy. This government-induced "pump priming" was an artificial stimulus and hardly a vote of confidence for free-market economics.

In the process, Reagan raised taxes 11 times, raised the debt ceiling 17 times, and spent more than the previous 39 presidents combined. Record budget deficits were the result.

Then something curious happened. We rolled back trickle-down policies in 1993 and budget surpluses appeared by 2001. Then something even more curious happened. Record budget deficits returned by 2009.

I'm hoping that the readers of this paper can help us out here. What happened between 2001 and 2009 to bring back the deficits? Answer: More trickle-down policies.

If we can figure this out we can also figure out, as The Wall Street Journal reported, why our budget deficits continue to climb when government spending under President Obama is rising at its slowest pace in more than 60 years (yes, that includes the stimulus).

Seriously, if we want to eliminate budget deficits we need to take a look at the policies that got us here. Then walk them back, one by one. This isn't rocket science.

Mark A. Martinez, Ph.D., is the author of The "Myth of the Free Market" and professor of political science at Cal State Bakersfield.

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