Wednesday, March 25, 2009

Where a true bi-partisan approach could help

I think it's given that, since we have a Democrat controlled government, they are going to spend a lot of money. I've resigned myself to that; it's unalterable at this point. If it were done wisely, it might even do some good. But I wish I was not seeing numbers that are so large they belong in Astronomy textbooks, instead of our government budget.

There was an interview recently with Republican Judd Gregg, who made what I thought were some very important observations, demonstrating ways that real bipartisanship could work if given a chance:

Bankrupt Nation?
[...] VAN SUSTEREN: If someone doesn't buy our debt, if a foreign country is unwilling to buy our debt, and we have exploding amount of deficit, we print more money, right? Is that how it's done?

GREGG: We buy our own debt.

VAN SUSTEREN: We buy our own debt, and then essentially, inflation gets very high, so that a loaf of bread is very expensive. Is that in theory how -- is that how we (INAUDIBLE)

GREGG: In a worst-case scenario, that's what would happen. You basically what's known as monetarize your own debt, where you come in and the Federal Reserve prints money in order to buy up our debt, and that creates inflation.


VAN SUSTEREN: So right now, you support the administration's effort to restimulate -- to sort of stimulate the economy and -- with a stimulus bill of some sort...

GREGG: I didn't support the stimulus.

VAN SUSTEREN: Well, not -- maybe not with the package inside in, but the whole concept that we need to stimulate the economy now because we're in a recession -- is there anything different that you would do right now?

GREGG: Absolutely. Right now, I would -- if I'd sent this budget up here, I would have put in instructions to bring under control the rate of growth of spending in the out years. What they've done is they've taken spending as a percent of gross national product up to 23 percent. Historically, the last 40 years, it's been 20 percent of GDP. That 3 percent is a huge amount of money on an economy our size. We've got to get it back down to 21, 22 percent, at the most. And the way you do that is you limit the rate of growth of entitlement spending.

VAN SUSTEREN: And is that something we do next budget? I mean, it can be...

GREGG: No, we should do it right now.

VAN SUSTEREN: Do it right now. If we don't do it right now, and it doesn't look like we're going to do it right now, what's the practical effect on us?

GREGG: Well, in the short...

VAN SUSTEREN: And by us, I mean the American people, you know...

GREGG: In the short term, we'll survive this, but in the long term, we're going to end up with debt accelerating at a rate that we can't afford to pay it off in a way that's going to continue [SB: cripple?] our productivity as a nation. Basically, if you triple it -- double the debt in five years and triple it in ten, years, you're basically putting yourself in a position where just supporting that debt, the cost of supporting that debt's going to eat up huge amounts of resources that should otherwise be going to making you more productive.

VAN SUSTEREN: Do you know of any Democratic U.S. senators that are pushing back on this budget that's being proposed by the president?

GREGG: Well, there are a lot of Senators -- there are a lot of people here in the Senate, a lot of Democratic members who are very concerned about this issue. And there are a number of proposals that are very bipartisan to try to address this issue. For example, Conrad/Gregg, which is a proposal which basically puts in place a process to force us as a government to face up to some of these policy issues and make some tough decisions. That's got very broad bipartisan support. All it needs is a little push from the White House, and we probably could put it across the goal line.

VAN SUSTEREN: Have you ever had this discussion with the president?

GREGG: I have. I've had it with the president, as have many of my colleagues. This is not a unique discussion. And the president is -- understands the issue. His staff understands the issue. The problem that they have, I guess, or the concerns that they have is they've got a very big and robust agenda. They intend to expand the size of government significantly, and I think they're not wanting to step back yet and say what's the long-term implications of this.

VAN SUSTEREN: Is their sort of agenda for the government independent of the way that they are looking at the economy -- I mean, have they decided that, This is what we want to do with the government, so we're going to -- we're going to go this direction, and we think it's going to help the economy, but that's more important than sort of trying to micromanage the economy right now?

GREGG: Well, obviously, in the short term, they've got to spend a lot of money. I accept that fact. And they've decided to do that, and I support, for example, the initiatives by Secretary Geithner. But at the same time, this is a two-track exercise. In the short term, we may have to spend some money, but in the long term, we have discipline our spending. And they haven't put in place the process for disciplining the spending long term. In fact, they've done just the opposite. Their proposal as they sent it up radically expands the size of government in the area of health care, in the area of student loans, in the area -- in a variety of areas, energy, and in just discretionary spending.

VAN SUSTEREN: Secretary Geithner -- going to go, stay? Should he go? Should he stay?

GREGG: He should stay. And the proposal he came out with out today is a reasonable proposal, and let's hope it works because we need it. [...]

It's interesting that he supports what Geithner is doing, and that he accepts that the Democrats are going to spend a lot of money. Still, he wants to bring the deficit under control. To me, that's the best we can expect from bipartisanship at this point. Damage control. I don't see any other possibilities right now, and Gregg's approach seems realistic and sensible given the circumstances we find ourselves in. Republicans need to work with the Democrat Bluedogs and anyone else who will listen, and try our best to control spending, and bring the deficit down before it causes a currency collapse. Thankfully some people are actually looking forward to where all this is taking us.

It's an interesting interview, hard to take excerpts from, it's worth reading the whole thing.

Related Links:

The Devaluing of American Currency Continues

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