December, 2002 and December, 2010: Same As it Ever Was Except . . .
I was unpacking some Christmas lights today that were wrapped in old newspapers. I am late again with this chore. I struggle dealing with things I don’t like to do. That’s normal, isn’t it?
I noticed from one of the old, crinkled newspaper pages that the big national story of December 29, 2002, was that extended unemployment benefits had expired the day before. Pundits were fretting that 26 weeks were not enough because 800,000 Americans had just been cut-off. Back then, President Bush made it clear he was ready to restore the extended benefits and NY Senator Hillary Clinton was trying to make sure he did.
Washington Post, December 29, 2002, by Dana Milbank:
Senator Hillary Rodham Clinton, D-NY, delivered the Democrats’ weekly radio address, and she blamed Republicans for the failure to extend unemployment benefits.
“In the recession of the early 1990s we increased benefits five times,” she said. “Today, our unemployment rate has soared to 6 percent, and Congress and the president have extended benefits only once – and once is not enough.”
Now, eight years later, President Barak Obama has cut a deal with with a resurgent Republican party to keep the current Bush tax rates in place for 2 years in exchange for 13 months of extended unemployment plus some other expensive add-ons.
Democrats don’t like the deal and many Republicans are recoiling at the cost of extending unemployment benefits for 13 months. Democrats are mad that Obama is not punishing the “rich” with higher tax rates and a confiscatory Estate tax. Republicans think it is unwise to spend another 60 billion on extended unemployment. It is.
So what’s new about Democrats arguing with Republicans about tax rates and unemployment benefits? Same as it ever was? Not exactly. In December, 2002 unemployment was 6 percent and Congress extended unemployment benefits 13 weeks. In 2010, unemployment is near 10 percent and benefits are about to be extended 13 months, if Speaker Pelosi can get her lame ducks to go along.
What else is new? In 2002, the federal deficit was a little less than 160 billion which was less than 2% of GDP. Today, we are looking at a deficit of 1.29 trillion. On a 2010 GDP of 14.7 trillion, that’s a deficit of nearly 9 percent of GDP! Yeah, it is time to be scared.
The United States is on a path that is leading to a financial disaster. This is true even though receipts to the federal treasury will increase in 2010 over 2009. Even with federal receipts increasing we have trillion dollar deficits forecast well into the future. Who can bail out the United States?
Were ifs and buts, candy and nuts, we’d all have a Merry Christmas. If the the Fed could print money without consequence, we’d have a booming economy. The truth is a lot of Americans are not going to have a very Merry Christmas this year and the economy is poor.
Americans aren’t dumb, but we’ve done everything we can to avoid dealing with the real problem. That’s normal, isn’t it?