Joseph White has written a timely article. In the past few weeks we have been deluged with dire warnings about the deficit, sometimes they featured the Chinese, sometimes the destruction of social security; it was all very dramatic. Then when the continuation of tax cut became an issue, it all faded a way until the wealthy were assured their tax cuts. It was a budget buster of colossal size, totally unsupportable. It will cripple the government in financing every expenditure save those supported by their own fees.
Now that the wealthy have their money, the deficit has returned as an issue. We must cut back on entitlements. We must find cuts in education, etc.
The two-faced asinine clowns of the beltway would be funny if they weren’t taken so seriously.
Joseph White in the article quoted below has doubts as to the importance of deficit reduction.
I have similar doubts about the dangers of the deficit. However, the idea of deficit reduction now in the midst of the Second Great Depression strikes me as far more serious and dangerous. Such austerity reduces the size of any recovery and delays it. I have seen estimates of up to ten years of recovery to return to 2007 levels of employment.
We need a serious national discussion about expenditures. We will not get it from Obama’s stacked commissions or the “beltway boys.” The big act is that these are not matters of dispute. “Everyone recognized the danger of deficits.” “Like a well functioning family, a nation must not have any debts.” Etc.
Those are not settled matters. There are far more nuances to national debt management than any family budget.
As usual, I call with little hope for actual intelligent thought.
This is written by Joseph White at the Financial Times –
In the 1980s, deficit hawks recognized that, in the words of former CBO Director Rudy Penner, , “the crisis is there is no crisis.” In other words, the deficit wasn’t actually hurting people much. But it could, eventually, like “termites in the basement” as former OMB Director Charlie Schultze put it. How could this be dramatized?
One approach was to make arguments about the economic good that would be accomplished by reducing deficits. The idea was that lower deficits would produce greater national savings so more investment and a larger economy. Unfortunately, the standard economic estimates (such as by CBO) did not project enough extra growth to convincingly justify the pain of the deficit reduction. (Would you have abolished the Navy and Medicaid so that the economy would be 3% bigger thirty years later?). So deficit hawks promoted two other arguments, each of which should sound familiar.
One was to invent scenarios about what would happen if absolutely nothing were done for decades – a highly implausible case, but one that could, with sufficient assumptions, lead to economic disaster. The point was to promote so much fear that the goal of deficit reduction would take precedence over messy, uncomfortable subjects like the consequences of any particular means of reducing the deficit.
The other was to claim that “the markets” would eventually turn against the U.S. government and U.S. economy because of the spiraling debt, forcing some sort of payback that would make everyone miserable. …
I had never thought about it the way he presents it. I think this is similar attitude to Paul Krugman.
I recommend it to your reading and thought.