The Nation.

The Flaws in Rubinomics

By Thomas Palley

This article appeared in the May 21, 2007 edition of The Nation.

May 2, 2007

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  • As US deficits continue to mount, interest on the deficit, defense spending and spending on social security and medicare will continue to crowd out federal spending for all other purposes.

    Until the US Congress is willing to balance the budget or run surpluses, cut defense spending and propose limitations on the growth in entitlements (including making social security and medicare need based) badly needed investments in infrastructure and education as well as funds to provide healthcare to the uninsured will not be available.

    By managing the the US finances in a responsible manner, the Democrats will gain the credibility with the US public to make investments in education and healthcare for our neediest citizens and set the stage for the creation of economic opportunities for middle and lower income families.

    Michael Bass

    Upland, CA

    05/13/2007 @ 1:06pm


  • Possibly no American president was more concerned about deficits than FDR. Deficit spending was, for him, a way to encourage economic growth; but once that the economy got back on track, he wanted balanced budgets. In fact, well before the Depression was over, he wanted balanced budges, but sacrificed them in order to get people back to work.

    Deficits do matter: the reason our interest rates have not risen is because other countries are financing our deficits. If China invests less (due to economic downturn or growth in per capita consumption), they will not be able to take on loans. Capital will tighten in the U.S., thus causing higher interest rates (its called supply and demand). Further, we have to, to an extent, live with the anti-human rights and totalitarian views of the Chinese and Saudis exactly because they are funding our governments overspending/undertaxing.

    Although FDR proved balanced budgets should not the end-all for government, they do indeed matter very much.

    Bob DeLay

    Forest Hills, NY

    05/05/2007 @ 12:51pm


  • The US budget can easily be balanced and painlessly -- the Clinton administration proved that.

    All that needs to be done is to restore the top maginal rate from its current 36 percent back to 39.5 percent and the economy would again enjoy the surpluses of the late 1990's.

    A side benefit would be that the rich would not have so much to spend on conspicuous consumption, which would help in the fight against global warming.

    Mary Tracy

    El Monte, CA

    05/04/2007 @ 3:49pm


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