Bill Clinton Fed His Flock Democratic Daydreams and Fairy Tales
This column by ACRU General Counsel and Senior Fellow for the Carleson Center for Public Policy (CCPP) Peter Ferrara was published September 2, 2012 on Forbes.com.
Rhetoric versus reality. That is what this election is about, based on what we saw at the Democrat convention. Instead of a path to the American Dream, Democrats presented to America their fanciful daydreams.
The ever trustworthy Bill Clinton told the American people Wednesday night, “If you want a future of shared prosperity, where the middle class is growing and poverty is declining…you should vote for Barack Obama.” But not on the basis of what Obama has done in his term of office.
Census Bureau data shows that median household income has declined precipitously under President Obama, down from $54,983 in January, 2009, the month he entered office, to $50,964 by June, 2012. That’s a decline of 7.3%, or $4,019 per family, the equivalent of losing a little less than one month’s income a year, every year.
Moreover, the decline in middle class incomes since the recession technically ended in June, 2009, has been nearly twice as great as the decline during the recession. That is unprecedented. For comparison, at the same point in the Reagan recovery, as former Sen. Phil Gramm commented in the Wall Street Journal on August 30, “real median household income on an annualized basis rose by $3,380 or 7.7%.”
In addition, last September the Census Bureau reported more Americans in poverty, over 46 million, than at any time in the more than 50 years that Census has been tracking poverty. The poverty rate climbed to 15.1%, meaning nearly one in six Americans suffered in poverty.
When the new poverty report from Census comes out this month, The Huffington Post reports a consensus survey of experts indicates poverty could soar to as high as 15.7%, a record since the War on Poverty began in 1965.
So when Clinton told America Wednesday night, “We Democrats believe the country works better with a strong middle class, and real opportunities for the poor to move into it,” the question arises, so where is that?
But wait, Clinton said, “No President — not me or any of my predecessors could have repaired all the damage in just four years.” But the truth is they all did, in even less time, at least since the Great Depression.
Check out the history of U.S. recessions at the website of the National Bureau of Economic Research. It shows that before this last recession, downturns in America since the Great Depression almost 75 years ago have lasted an average of 10 months, with the longest previously lasting 16 months. This last recession started in December, 2007, 57 months ago. That is way more than enough time to get America booming again. But Obama has failed to do so.
Don’t try to make excuses for what has turned out to be the worst recovery from a recession since the Great Derpession. Every recession is accompanied by some financial crisis, some housing downturn. You say this one was worse than any other? Well, the American historical record is the worse the recession, the stronger the recovery, as the American economy snaps back to its long term, world leading, economic growth trend, which entails actually faster than normal growth for a time to catch up.
Based on this historical record, America should be enjoying the third year of an economic recovery boom right now, like under Reagan in the 1980s. But instead what we have is no real recovery at all. Even though Obama told us if we enacted his nearly $1 trillion so-called stimulus, unemployment would not rise above 8%, it has not been below 8% since then. That has been the longest period with unemployment above 8% since the Great Depression, while middle class family incomes have still been falling, and poverty still rising.
This is precisely Obama’s fault because instead of following the enormously successful, proven and logical policies of the more modern supply side economics of Reagan, Obama went back to the proven failed, illogical Keynesian economics of the 1970s, and even the 1930s. Borrowing a trillion dollars out of the private economy to spend a trillion back into it, as Obama’s stimulus did, does not do anything to promote the economy on net. Rather, because the resulting deficits imply future tax increases, and the private sector spends the money more productively overall than the public sector, it is a net drag on the economy.
Reagan turned around the double digit unemployment, double digit inflation, and double digit interest rates that Keynesian economics produced in the 1970s, replacing it with the greatest economic boom in world history from 1982 to 2007. Art Laffer and Steve Moore in their book The End of Prosperity called it “the greatest period of wealth creation in the history of the planet.” Steve Forbes called it an “economic golden age” in his celebrated Forbes magazine article, “How Capitalism Will Save Us.”
Sadly, Obama doggedly has pursued the opposite of everything Reagan did in great detail. Based on the past 100 years of American economic history, and simple logic, Obama should have known better, and the American people deserved better. That is why instead of being renominated and reelected, he should be impeached.
But Clinton told America Wednesday night that the Republicans “want to go back to the same old policies that got us into trouble in the first place” in particular, “to cut taxes for high income Americans even more than President Bush did.” The only fair response to this is to call it quite rightly “stupid,” because there is no economic theory under which tax rate cuts, particularly on successful small businesses, job creators, and investors, like Bush enacted, and Romney proposes, are recessionary. Even Keynesian economics recognizes such rate cuts as expansionary. There is nothing even in Marxist economics that says otherwise. Sweeping, across the board, tax rate cuts worked to produce historic economic booms in the 1920s, the 1960s, and the 1980s, extending all the way to 2007, as noted above.
What caused the financial crisis of 2008, ending Reagan’s generation long economic boom, was first Bill Clinton’s overregulation ignited in the 1990s, forcing banks to debase traditional lending standards, and make subprime loans to those the banks felt couldn’t pay the loans back. That was all done in the name of fairness and Affordable Housing. See Paul Sperry, The Great American Bank Robbery, and Gretchen Morgenson, Reckless Endangerment, among many other sources. Once traditional lending standards were trashed, higher income borrowers joined the party as well, with mortgages to speculate in second and third homes. The government’s Fannie Mae and Freddie Mac joined in securitizing and spreading those toxic loans throughout the entire world financial community, with their government subsidized credit pipeline polluting world financial markets. That is where the speculative financial instruments that brought down leading financial institutions came from.
The second cause was Bush’s cheap dollar monetary policies, pursued by the Fed in the 2000s, with Bush’s braindead Treasury Secretaries cheering it on. The resulting easy money and record low interest rates continuing for years further pumped up the housing bubble, causing financial chaos when the bubble inevitably burst.
It is Obama and the Democrats who have kept those policies going, not the Republicans. Their financial reforms studiously avoided doing anything about the subprime debasement, only the market has stopped those loans for now, which the Obama Justice Department is again calling discrimination. Dodd-Frank institutionalized rather than ended bank bailouts. And the Fed under Obama, with his Administration still cheerleading it, has only expanded Bush’s cheap dollar, easy money, record low interest rate monetary policies, setting the foundation for future busts.
Clinton veered into fairy tales when he discussed Romney’s tax proposals, repeating the fabrication that Romney proposes a $2,000 per family tax increase for the middle class. Romney actually proposes cutting income tax rates across the board for everyone by 20%, including the middle class, as Reagan did in cutting income tax rates by 25% in 1981, which spawned the generation long, 1982 to 2007 boom.
That would involve reducing the 25% income tax rate, which applies today to singles earning between $35,350 and $85,650, and to couples earning between $70,700 and $142,700, down to 20%, and the 15% tax rate, which applies to singles earning between $8,700 and $35,350, and to couples earning between $17,400 and $70,700, down to 12%. Those would be the lowest federal income tax rates faced by the middle class since Franklin Roosevelt’s tax increases during the Great Depression.
Romney’s tax plan would also extend all of the Bush tax rate cuts for everybody now scheduled to expire in January, which includes the Bush middle class tax cut reducing the 28% tax bracket to 25%, and the Bush reduction in the 15% rate to 10% for the lowest income earning couples making less than $17,700 and singles making less than $8,700. Romney’s tax plan would reduce that 10% rate to 8%, which is another tax cut for the middle class in higher tax brackets because it reduces the rate that applies to the first dollars they earn below those thresholds.
In addition, Romney proposes further sweeping tax cuts for the middle class by pledging to repeal Obamacare, which includes many middle class tax increases, in direct violation of Obama’s 2008 campaign pledge not to increase taxes on singles making less than $200,000 a year, and couples making less than $250,000.
Those Obamacare tax increases include the individual mandate, upheld by the Supreme Court precisely because it is an effective tax on working people and the middle class. The mandate forces working and middle income taxpayers to buy the expensive, politically correct health insurance not that they want to buy, but that Obama’s HHS Secretary Kathleen Sebelius decides they must buy. While Obamacare includes new health insurance welfare to help pay that cost, the net that working and middle class taxpayers would have to pay is still like a new payroll tax or income tax. And the new health insurance welfare entitlement is paid for by taxpayers too, of course, which includes further Obamacare tax increases on the middle class.
Then Clinton tried comedy in discussing Medicare. He alleged, “Both Governor Romney and Congressman Paul Ryan attacked the President for allegedly robbing Medicare of $716 billion. Here’s what really happened. There were no cuts to benefits. None. What the President did was save money by cutting unwarranted subsidies to providers and insurance companies that weren’t making people any healthier.”
But here’s what really really happened. The President cut $716 billion from Medicare in the first 10 years of Obamacare alone, primarily by reducing payments to doctors and hospitals for health care for seniors. When you go to the grocery story and pay for bread, milk, and cheese, you wouldn’t call that unwarranted subsidies to grocery stories and farmers. And if you don’t pay the prices you don’t get the food. Similarly, if the government is not going to pay the doctors and hospitals, seniors are not going to get their health care under Medicare. But oh no, Clinton and Obama tell us, that is not a cut in benefits.
As a result of these Obama Medicare cuts, Medicare’s Chief Actuary Rick Foster reports that by the end of this decade, Medicare will be paying less to doctors and hospitals for health care for seniors than Medicaid pays for health care for the poor, with Medicare then falling farther and farther behind Medicaid each year.
But Medicaid does not pay enough for the poor on the program to get timely, essential health care, particularly the sickest and those in most in need of the best health care. Academic studies show that the poor suffer worse health outcomes as a result, including premature death. Under Obamacare, soon enough seniors will be lined up behind welfare mothers in trying to find doctors who will see them and hospitals that will admit them. These cuts affect seniors already retired today, not just those years into the future.
Foster reports that even before these cuts already two-thirds of hospitals were losing money on Medicare patients. In a few short years, hospitals that serve seniors in particular will begin closing, and retirees will have increasing difficulty obtaining access to care. As Harvard University health economist Joe Newhouse explains, seniors will likely have to seek care at community health centers and safety net hospitals.
And this does not even count any further cuts that may be adopted by Obamacare’s Medicare death panel, the Independent Payment Advisory Board (IPAB). That Board will be composed of unelected, appointed, Washington bureaucrats with the power to adopt still more Medicare cuts that would become effective even without the approval of Congress.
Clinton advanced into high level fiction in discussing Obama’s waivers of the work requirement for the 1996 welfare reforms. Clinton vetoed those reforms twice before the Republican Congress forced him to accept it by passing it a third time just before the election. As Clinton told the tale of Obama’s waivers, “When some Republican governors asked to try new ways to put people on welfare back to work, the Obama Administration said they would only do it if they had a credible plan to increase employment by 20%. You hear that? More work. So the claim that President Obama weakened welfare reform’s work requirement is just not true.”
But the truth is that under the 1996 welfare reform law, states and Governors do not need a waiver to increase work for those on welfare. The whole point of the 1996 welfare reform law was to give states broad discretion in revising the old Aid to Families with Dependent Children (AFDC) welfare program. The states and Governors are free under that law to increase required work in that welfare program any time they want. What they cannot do is reduce work below the work required in the work requirement in the reform statute.
What the Obama Administration announced is that they would grant waivers to states from that required work. Which means freedom to give welfare again without as much work, or any work. Even worse, there is no authority in the welfare reform law for the federal government to issue any such waivers from the work requirements. The President’s responsibility under the Constitution is to take care that the laws be faithfully executed. The President’s waivers from the work requirements violate this Constitutional duty, an impeachable offense.
Clinton continued with his trademark dishonesty in saying that the Republicans proposed to cut Medicaid by a third, which would hurt poor kids, nursing home care for seniors and people with disabilities, and kids with special needs like Downs Syndrome or Autism. But all that Romney and Ryan have proposed is to extend the exact same reforms that were adopted for AFDC in 1996, with Clinton’s signature, to Medicaid. Under those 1996 reforms, two-thirds of the poor on the program left for work, resulting in a documented increase in their incomes of 25%, while saving taxpayers 50% of the costs of the old program.
Extending those same 1996 “block grant” reforms to Medicaid would benefit the poor much more. The states would then be free to give the poor assistance to buy the private insurance of their choice, which would free them from the Medicaid ghetto, where some actually die because they can’t find doctors and hospitals in time who will take Medicaid and its poor payments. Instead, the poor would be liberated to enjoy the same health care as the middle class, because they would have the same health insurance as the middle class, which has to pay doctors and hospitals well enough so that those covered by the insurance can get timely care. Otherwise, the insurers would lose all their customers.
The Democrats this year, by no means just Bill Clinton, are trailblazing new realms of dishonesty in American politics. They simply make up what the Republicans are for, from a tax increase on the middle class, to supposed Ryan budget cuts that aren’t in the Ryan budget, to the supposed Republican War on Women. This is reminiscent of the old Soviet style propaganda, which would spout the transparent opposite of the truth, and count on Soviet control of the media to keep the population buffaloed. The insight is that leading media organs like the New York Times and the Washington Post are as controlled by the Democrat Party today, as Pravda and Izvestia where controlled by the Communist Party in the old Soviet Union, and so can be counted on to cover for the Democrats today, as the old Soviet controlled press covered for their party masters.
True, the Democrat Party control of the Times and the Post today is voluntary, while the Communist Party control of Pravda and Izvestia was involuntary. But does that make the travesty less, or worse?