Economist Dean Baker really lets John Kerry, Patty Murray and Max Baucus have it for the column that appeared in the Wall St. Journal this week -- but he's especially savage with Kerry:
Senator John Kerry, along with the two other Democratic senators appointed to the "Super Committee", had a column in the Wall Street Journal yesterday on their approach to the committee's work. This piece is infuriating for its empty platitudes and the refusal to acknowledge economic reality. In just 700 words the piece promulgated 3 major economic myths while ignoring the fundamental truths about the economy and the budget.
[...] The reason that we actually had a $240 billion surplus (2.4 percent of GDP) in 2000 was that the United States had a stock bubble propelled boom at the end of the decade. This caused the economy to grow much more rapidly than CBO expected with the unemployment rate falling to 4.0 percent in 2000, rather than the 6.0 percent predicted by CBO. Do the senators not remember the stock bubble?
In addition to promoting these false stories about the economy and the budget, the senators fail to tell the true story. The large deficits the country currently faces are not the result of an ongoing pattern of excessive profligacy. They are the result of the economy's plunge following the collapse of the housing bubble. Even with the cost of the wars, the Medicare drug benefit and the Bush tax cuts, the projected deficits were relatively modest prior to the collapse of the housing bubble.
The true story is that our deficit problem is really an economic problem - we let a huge housing bubble grow, which would inevitably collapse and sink the economy. The deficit is needed now to make up for the $1.2 trillion loss in annual demand from the private sector, which had been generated by the housing bubble. The bubble had led to booms to both construction and consumption that have gone bust now that house prices have crashed.
Senator Kerry deserves special blame in this story because he could never be bothered to pay attention to the housing bubble, even when he was running for president in 2004. I recall urging his campaign staffers to pay attention to the bubble. It was like talking to Barney Frank's dining room table.
Of course Robert Rubin was one of Kerry's top economic advisers. Rubin was making tens of millions of dollars at Citigroup whose profits were derived largely from marketing subprime junk loans. So perhaps it is not surprising that Kerry had little interest in learning anything about the housing bubble.
Still it is more than a bit infuriating that Senator Kerry and his colleagues would now be lecturing the country on the need for hard choices. If they could have been bothered to do their damn jobs just a few years ago, we would not be in this situation today. As a result of their failure, tens of millions of workers are unemployed or underemployed. Yet the senators, who are still drawing their paychecks, want the country to sacrifice even more. Maybe now they can be persuaded to learn a little economics.