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Public Statements

Issue Position: Economy & Debt

Issue Position

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I take financial responsibility very seriously. I myself carry no debt. I do not believe in spending money I do not have. Taking on debt as a form of investment --in a business, or for a nation--makes sense. But simply living beyond one's means is irresponsible, and I oppose it as a practice for individuals and for our country.

However, the Republicans current insistence on budget cuts is irresponsible and damaging in its own way. The Republicans seem to be ignoring four important economic realities:

1) the economy remains in a depressed state, with so many millions of Americans unemployed;

2) it is the depressed state of the economy, rather than any binge of excessive spending, that is the principle cause of our large federal deficit;

3) the malady that afflicts the economy is inadequate demand, meaning that the private sector --with consumers retrenching and paying off debt, and businesses sitting on trillions of dollars waiting for signs that they could sell more if they produced more--is not spending enough to create the robust recovery we need;

4) in this situation, the most important way the government can help the economy is by spending money --wisely, for things we really need, like repairing our crumbling infrastructure and supporting the development of alternate sources of energy--so that there is enough demand to put our under-utilized economic resources to work.

So cutting too soon is counter-productive. (The Congressional Budget Office has said that the cuts the Republicans demanded last April cost the economy some 400,000 jobs--just compounding the real problem.) Even a conservative voice like Ben Bernacke, the head of the Fed appointed by George W. Bush, has made that same point.

This does not mean that it's unimportant to put our fiscal house in order. It's just that the time for the government to tighten is when the rest of the economy is running loose. And the time for the government to be loose is when the rest of the economy has tightened into a defensive crouch.

This is the chief insight of one of the most important ideas in economics. And one can find this idea pre-figured in the Biblical story --from the book of Genesis-- in which Joseph interprets the dreams of Pharaoh.

Pharaoh dreamt that "He was standing by the Nile, when out of the river there came up seven cows, sleek and fat, and they grazed among the reeds. After them, seven other cows, ugly and gaunt, came up out of the Nile and stood beside those on the riverbank. And the cows that were ugly and gaunt ate up the seven sleek, fat cows." He then awakened, and went back to sleep and had the same dream, only about seven healthy stalks of grain being devoured by seven shriveled stalks.

Pharaoh wanted to know what the dreams meant, and only Joseph could interpret them. Joseph explained: "Seven years of great abundance are coming throughout the land of Egypt, but seven years of famine will follow them." And then he explained what Pharaoh must do in view of this coming cycle of fat years and lean.

"Let Pharaoh appoint commissioners over the land to take a fifth of the harvest of Egypt during the seven years of abundance. They should collect all the food of these good years that are coming and store up the grain under the authority of Pharaoh, to be kept in the cities for food. This food should be held in reserve for the country, to be used during the seven years of famine that will come upon Egypt, so that the country may not be ruined by the famine."

During the fat years, the government takes a cut of the harvest to build up the granaries so that during the lean years the government spends from the granaries to make up for the lack of harvest from the fields.

In a capitalist economy, the business cycle reliably produces a cycle of fat years and lean. That's called "boom and bust." During boom years, the government should build up the treasury with a combination of spending cuts and tax increases, and during the bust years the government should empty the treasury with a combination of spending increases and tax cuts.

We're in the bust years now.

The problem with our national debt is not that we're emptying our governments financial "granaries" now. The problem is that when the Republicans controlled the government during the preceding good economic years, they greatly increased the debt when they should have been filling the treasury, adding to the surpluses that they inherited in 2001. Instead, they squandered the surpluses with unfunded wars, tax cuts for the rich, etc.

The fiscal policy of the government should be just the opposite of what we hear from the Republicans: act like a family, cutting back in hard times.

It should be consistently to lean against the business cycle. Be tight in the fat years, loose in the lean.

So I'm all for putting our fiscal house in order. Once the economy is robust again, some combination of tax increases and spending cuts would be good. But to get to that robust economy, we should not listen to those Republicans who got us into this economic ditch in the first place, and who would keep us there with their backwards ideas.

As a member of Congress, I will support fiscal responsibility and the insights of economics on how government should help the economy not get too overheated, and then not to get mired in the pit of a severe economic downturn.


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