I.O.U.S.A - Addison Wiggin [38]
“ It took forty
- two presidents “ It took forty - two presidents two two hundred twenty
- four years to hundred and twenty - four years to run up a trillion dollars of U.S. debt run up a trillion dollars of U.S. debt held abroad, ” pointed out Senator
held abroad, ” pointed out Senator Conrad. “ This president has more Conrad. “ This president has more than doubled that amount in just than doubled that amount in just six years. ”
six years. ”
“ We can ’ t pay our bills now — that ’ s why this debt is jumping so dramatically. It just fundamentally threatens our long -
term economic security, ” continued the senator. “ If we don ’ t deal with this, our children and grandchildren are going to have a much different life then we have enjoyed. We ’ ll be in such deep pot to the rest of the world, we ’ ll be dependent on the kindness of strangers, we ’ ll be dependent on other countries continuing to loan us vast amounts of money. ”
David Yepsen posed a question: “ We fi nance these defi -
cits and this debt by borrowing money from other countries, China for example. What implications does this have for our c04.indd 73
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74 The
Mission
foreign policy if we ’ re in hock to other governments? Does that give American presidents fl exibility to make foreign policy decisions, or do we have to worry about what our bankers think?
Bob Bixby answered: “ We have to worry about what our bankers think. ”
With increased savings, the United States can reduce its reliance on foreign capital and be sure that the nation ’ s mortgage is held primarily by Americans. The United States needs to stabilize the dollar and stimulate foreign exports, especially in its small business sector, if we want to maintain our competitive posture and be successful over time.
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C h a p t e r 5
THE LEADERSHIP
DEFICIT
After the Second World War we started running budget surpluses and did that through the 1950s and into 1960. Only in the past forty years or so have we accepted that it ’ s a bipartisan thing not to have fi scal discipline.
— Paul O ’ Neill
Do you think there is a risk of a recession? ” a reporter asked President Bush 43 at a press conference in September of 2007. “ How do you rate that? ”
“ You know, you should talk to an economist,
”
answered the leader of the free world, leaning on the podium, and laying on the “ aw, shucks ” Texas charm. “ I think I got a
‘ B ’ in Econ 101, ” President Bush continued with a chuckle.
“ I got an ‘ A, ’ however, in keeping taxes low and being fi scally responsible with the people ’ s money. ”
Since the Bush administration began in 2000, the U.S.
economy has been on a rollercoaster ride. Still, even if the 75
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76 The
Mission
United States was in recession between March and November
The Laffer Curve:
The core concept
2001, a report from the U.S. Congress Joint Economic behind the supply-Committee showed that
“ the U.S. economy outperformed
side economics
its peer group of large developed economies from 2001 to followed by
2005. The United States led in real GDP growth, investment, both the Reagan
industrial population, employment, labor productivity, and and Bush 43
administrations.
price stability. ” But, by the end of 2006, cracks were starting The theory
to show in the fa ç ade of the U.S. economy. Fears that the real suggests that
estate boom couldn ’ t possibly last forever, as many American with tax rates at
home owners had believed, began to surface. The U.S. dollar an optimum level,
continued its long, slow slump against other currencies, and the government
can help grow the
interest rates began to edge up again.
economy out of
Up to this point, the Bush administration was follow-defi cits. Thus far,
ing the economic script set out by Ronald Reagan almost the theory remains
20 years before. We talked to Arthur Laffer, who sat on Reagan ’ s unproven.
Economic Policy Advisory Board. Arthur Laffer is most associated with the term taxable income elasticity, or what has