Department of Complete 180 Degree Intellectual Reversals...
I haven't seen anything this big since John Yoo's pivot to his current position from his 2000 claim that Bill Clinton had exceeded his powers as commander-in-chief by placing U.S. forces under a British NATO general...
Niall Ferguson, New York Times December 12, 2003:
President Both: Bush Can Have Both Guns and Butter, At Least for Now SECTION: Section 4; Column 1; Week in Review Desk; Pg. 1 LENGTH: 1640 words: GUNS or butter: this is the choice historians conventionally say that governments face. Either they can build up their military capabilities to wield power abroad, or they can aim to increase their citizens' living standards.... The Bush administration is currently engaged in an audacious -- some would say reckless -- experiment to disprove this theory. To judge by his actions, President Bush's response to the question "Guns or butter?" is: "Thanks, I'll take both." This, in short, is the guns and butter presidency.
It's generally a safe assumption that, in politics as in life, you can't have it both ways. But there are exceptions -- provided you get the timing right. Today's economic circumstances mean that, in the short run, the administration can actually afford to spend billions simultaneously on conquest and on consumption.... All Mr. Bush needs to stand a good chance of re-election is 12 more months of guns and butter. In short, President Bush's second term depends on his being President Both.... In the runup to Thanksgiving... approval of a $401 billion military appropriations package for next year, the biggest ever... approval of a Medicare overhaul that increases the spiraling costs of the system by adding a drug prescription benefit. But these are only two parts of a wider guns and butter policy....
To critics of the White House, the rapid shift of the federal budget from surplus to deficit is a sign of profligacy -- part of what they would call the Enronization of public finance.... [R]ecall that the United States has broken the guns or butter rule before... President Ronald Reagan.... The crucial point, of course, is that in the short term at least, fiscal policy is not a zero-sum game: a government can easily increase military spending without reducing consumer demand if it finances the higher spending by borrowing rather than taxation (and provided taxpayers do not view borrowing as future taxation and reduce consumption in anticipation)....
[Bush] inherited an economy on the brink of a deflationary crisis.... Unlike Herbert Hoover, however, Mr. Bush did not respond to the crisis with spending cuts and tax increases -- quite the reverse. The tax cuts of his presidency... have had at least some countercyclical impact.... [T]he lessons of the Great Depression have been learned not just in the Federal Reserve... [but] in the Oval Office. That's why the downturn of 2001 was so shallow and short.... [F]alling interest rates have drastically lowered the cost of servicing the federal debt.... [T]he Bush administration has considerable fiscal room for maneuver....
An interesting question is why this fiscal black hole is not causing more alarm for financial markets.... So powerful are the deflationary forces today... that Washington can splurge on its military and social services with only a modest impact on expectations of inflation. It helps that the United States has a unique advantage over all other sovereign borrowers: central banks and other institutions around the world need to hold dollars as the currency most frequently used in international transactions.... America can count on selling large amounts of dollar assets, like 10-year Treasury bonds, to foreigners -- very large amounts.... The only imminent danger is that the dollar could slide sharply against Asian currencies, as it has against the euro. But the chief losers then would be the Asians...
Courtesy of James Gibney.
