Against the Conventional Wisdom: A Primer for Current Economic Controversies and Proposals

By Douglas Dowd | Go to book overview

2
Fiscal Policy

Where Confusion Is King, Chaos Awaits

The word fiscal comes from fisc, Latin for "treasury." The U.S. Treasury is the instrument of U.S. fiscal policies -- it banks the taxes and writes the checks. The architects of the policies are Congress and the president; the realm of fiscal policies is the spending and taxing by the federal government. When more is spent than is taxed in a given year, the difference is a deficit, which increases the national debt by the same amount. The deficit must be financed by selling U.S. bonds and notes. When the government's annual budget is balanced, there is neither deficit nor surplus, and the national debt is unchanged. A surplus -- more taxes than spending -- reduces the debt.

Beginning in November 1995 and repeated twice in the first weeks of 1996, many government offices were closed because "there was no money left" in the Treasury to pay wages and salaries. The Republican-controlled Congress, seeking to pressure President Clinton into accepting the GOP budget, had not authorized the continuing appropriations necessary to pay wages and salaries (excepting, it should be added, those of Congress and the military and a few others), by refusing to raise the limit on the debt (then $4.9 trillion) -- a permission granted routinely in the Reagan and Bush administrations (when the debt rose from $1 trillion to over $4 trillion).

Around April Fools' Day 1996, the GOP gave in, having realized that each additional day of deadlock was increasing its, not Clinton's, unpopularity. The debt limit (that is, the Treasury's borrowing authority) rose another half trillion, and the U.S. Government could once more pay its bills.

As "balance the budget" mania was increasing, Clinton had become a convert; by early 1995, Clintonhad agreed that the budget had to be balanced. Setting aside the "how," the noisiest issue dividing Congress and the president was when -- by the GOP's arbitrary year 2002 or Clinton's equally arbitrary 2005? Although until 1995 Clinton had not proposed balancing the

-15-

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Against the Conventional Wisdom: A Primer for Current Economic Controversies and Proposals
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Preface and Acknowledgments ix
  • 1 - Mouths and Realities of the Free Market 1
  • 2 - Fiscal Policy 15
  • 3 - International Production, Trade, and Finance 28
  • 4 - Jobs and Joblessness 42
  • 5 - Income and Wealth and Power and Poverty 55
  • 6 - Welfare and Social Securlty 73
  • 7 - Health, Education, and Housing 90
  • 8 - Environmental Deterioration 112
  • 9 - Expenditures on the Military and Crime 129
  • 10 - Needs and Possibilities 142
  • Notes 159
  • About the Book and Author 192
  • Index 193
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