"We've become a banana republic"

By Geraldine Sealey
November 23, 2004 9:48PM (UTC)
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We're not economists, but none of this sounds very good. Faced with growing deficits, ballooning costs of Social Security, and a fixation on reckless tax cuts, Republicans have apparently devised a new have-your-cake-and-eat-it-too scheme that sounds too smoke and mirrors to be sound fiscal policy. According to the Washington Post, "Republican budget writers" think they've found a way to cut the deficit and also borrow billions more dollars to overhaul Social Security -- just don't count the billions of additional debt and move them "off-budget."

Democratic senator Kent Conrad calls it "the theater of the absurd, where you spend money, but it doesn't count, you borrow money, but you deny it. Republicans are becoming further and further detached from reality," he told the Post.


" ... Already, there are concerns that foreign creditors in particular are growing tired of the U.S. government's constant need for cash, Conrad said. If lenders are reluctant to finance the president's Social Security plan, interest rates may have to rise sharply to entice them to do so. That could harm the overall economy. 'This is more than political blather,' Conrad said. 'This gets to the markets, and people who are in the markets can add and subtract.'"

Paul Krugman, who actually is an economist, has an even scarier warning: We're turning into Argentina. In an interview, Krugman told Reuters he's most concerned Bush will ignore the advice of economists and push through more tax cuts while also trying to privatize Social Security. 'If you go back and you look at the sources of the blow-up of Argentine debt during the 1990s, one little-appreciated thing is that social security privatization was a important source of that expansion of debt,' said Krugman. 'So if you ask the question do we look like Argentina, the answer is a whole lot more than anyone is quite willing to admit at this point. We've become a banana republic.'"

Geraldine Sealey

Geraldine Sealey is senior news editor at Salon.com.

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