Streams of Confusion from Stephen Rattner

Wednesday, August 17, 2011
Streams of Confusion from Stephen Rattner
Posted by Robert Wenzel at 6:53 AM

Democratic operative Stephen Rattner is out with a very confused Op-Ed charging that Republican presidential candidates are far, far too extreme. If that were only true.

He writes:

Take the agreement to avert a disastrous default by cutting at least $2.1 trillion from the deficit over the next decade. Mitt Romney, Michele Bachmann and Ron Paul all opposed it. Only Jon M. Huntsman Jr. (whose poll numbers ­ perhaps not coincidentally ­ are in the single digits) supported it.

Rattner, of course, does not mention that the $2.1 trillion cut in spending is not a real cut, but a cut only in "baseline" budget increases that will lead, conservatively, to a $7 trillion increase in the deficit over the next 10 years.

This is how he, like most in Washington, would like to frame the debate. It is dishonest talk about what the deficit really is. Indeed, Romney is not likely to demand much more than this supposed $2.1 trillion "cut".

Rattner then tells us:

Not to be outdone, Mrs. Bachmann and Mr. Paul ventured still further, insisting that they would never vote to raise the debt ceiling. That may sound good on the Iowa campaign trail, but it would easily tip the economy into an unending downward spiral.

Bachmann seems to be just mimicking Ron Paul's views, with a warmonger twist, but what is wrong with not raising the debt ceiling? If revenues decline for individuals or businesses, cutting back is exactly what is done. Increasing the debt ceiling leads to either crowding out of private sector borrowing or Fed buying of the debt, which is ultimately price inflationary. These, apparently, are the two options that Rattner prefers rather than not raising the debt ceiling.

For him, crowding out of private sector borrowing or Fed money printing are never considered as part of the increase in the debt ceiling equation. To him a debt ceiling increase is magic money, without consequences, or ignored consequences.

Rattner then goes on to specifically attack Ron Paul:

Mr. Paul, who finished second in the Iowa straw poll on Saturday, has for decades sought to abolish the Federal Reserve, arguing that it is corrupt and unconstitutional. Eliminating our central bank is a crazy idea that would plunge the country back into an oscillating 19th-century world of panics and busts.

Is Rattner serious? Does he not realize that oscillating panics and busts are what we have under the Federal Reserve? Did he forget that he was named by President Obama the "auto czar" to "rescue" the auto industry during the most recent economic bust? How can guys like Rattner, in the face of the current economic turmoil, suggest that the boom-bust cycle is a thing of the pre-Fed era?

In fact, government involvement in money printing has been at the core of the pre-Fed and current Fed boom-bust cycles. It's only when the view that money printing, and the distorting effects it has on an economy are understood, that the boom-bust cycles caused by money printing will end.

Rattner's support of an economic structure based on increasing debt, on manipulative money printing that only devalues the dollar, and creates boom-bust cycles, sounds extreme to me.

The one point where Rattner does make some sense is in his views about the current Republican candidates and how they would rule if they were elected President, but there is new confusion by Rattner's not explicitly removing Ron Paul from the comment:

Perhaps these Republican aspirants are simply pandering to antigovernment sentiment and, if elected, would govern more sensibly. Franklin D. Roosevelt campaigned on eliminating "unnecessary functions of government" and then vastly expanded federal spending to fight the Depression. Bill Clinton did the reverse, pledging tax cuts in response to the 1990-1 recession but governing as a fiscal moderate.

This is likely true of all the candidates except for Ron Paul. It is dishonest for Rattner to lump Dr. Paul in with the other candidates who will change their views to win just one more vote. Ron Paul has held consistent views for decades. If he is elected, his Presidency would very much reflect those views.

A Ron Paul Administration would be very different from any other Republican Administration. It would, indeed, be an administration that would move toward cutting government spending dramatically, ending the Fed and all the other government programs and agencies that stifle economic growth and liberty.

For Rattner, to lump Ron Paul in with these other candidates is nonsense, only to be exceeded by the nonsense he rattles about in favor of an ever growing government that will somehow be financed by ever more borrowing, until the globe is totally saturated by Treasury debt. And then what?

http://www.economicpolicyjournal.com/2011/08/rattner-republican-presidential.html