With all that’s going on, it’s hard not to think that we’re spending ourselves into fiscal oblivion. In the past, I’ve been a deficit hawk. There were a few of us who started bitching about the irresponsible tax cuts and debt increases coming from the past administration. Our point was not then (and isn’t now) that we couldn’t borrow the money, it’s that it didn’t make any sense at the time. What Bush and the Republicans in Congress did prior to 2006 was massively increase structural deficits to finance the operation of the government. The problem with that is, when a serious economic dislocation occurs, you need to be able to spend massively to make up for the shortfall in the private sector.
And that means lots of new debt. If we were already in deficit, it really starts to add up.
In effect, what the tax cuts did was double our debt without providing solid, broad economic growth and leave us in a hole. Then came the global credit crisis and the most severe recession in this country since the Depression. Unfortunately for all these new deficit hawks, they’re getting it wrong (just like Pete Peterson). Now they’re all clamoring for fiscal austerity.
OK, let me point out that this isn’t new (we talked about it last year). Those same folks also said stimulus wouldn’t work and it did (the most recent job report notwithstanding… but, take a second and remember WE TOLD YOU STIMULUS NEEDED TO BE LARGER). They also said that all this new debt would drive up interest rates (they were wrong, again), mostly because investors need to make returns on their money and there is precious little in the way of investments out there in fixed income world in terms of new issuance. Which means the government is the only game in town if you want a net positive return.
These new deficit hawks promoting austerity were wrong then and they are wrong now. This guy is right… spot on, completely, right. So is this guy.
Trumka made it very clear. “We have no short-term deficit problem.” We have a jobs problem, and we’re not doing a heck of a lot about it. And more is being done inside Washington to pay attention to the former than the latter. “The deficits facing our country right now are our jobs deficit and our infrastructure deficit.”
The deficit, right now, ain’t the problem. Without a real economic recovery that’s sustainable, tax receipts will never go up and we’ll continue running structural deficits which will continue to add to the debt. The deficit will come down, on it’s own, when we get the economy really moving. It’s starting now and there are tons of positive signs. However, doing what the assholes want will crush that nascent recovery and then we’ll have much larger problems.