Slog
News & ArtsFriday, December 28, 2012
Politics / Economy Nobody Cares About the Deficit
Posted by Goldy on Fri, Dec 28, 2012 at 2:24 PM
I'm far from the first one to point this out, but if there's anything this fiscal cliff "crisis" teaches us, it's that nobody really cares about the deficit. Yeah, everybody understands that long term, we can't indefinitely grow the national debt faster than the economy as a whole. That would be bad. Eventually. Sure.
But short term? If anybody really believed that we have a short term deficit crisis and that budget austerity is the surest path toward prosperity, well, the fiscal cliff is the mother of all austerity policies! Increase revenues and cut spending—you can't address a budget deficit more directly than that. And the only thing Congress needs to do to implement this deficit reduction policy is to do nothing.
But of course, that's not what anybody really wants. The Democrats don't want to go over the cliff because their Keynesian sensibilities rightly tell them that now is the wrong time for fiscal austerity, and the Republicans don't want to go over the cliff because their Randian ideology tells them that the only moral economic policy is to cut taxes on the wealthy while cutting services for the poor.
But neither side could really give a shit about the deficit. At least, not short term. Nor should we.
1
Along those exact lines I love Krugman's close the other day. He's been so consistent on this:
Regular readers know that I and other economists argued from the beginning that these dire warnings of fiscal catastrophe were all wrong, that budget deficits won’t cause soaring interest rates as long as the economy is depressed — and that the biggest risk to the economy is that we might try to slash the deficit too soon. And surely that point of view has been strongly validated by events.http://www.nytimes.com/2012/12/24/opinio…
The key thing we need to understand, however, is that the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis.
So we cannot and will not persuade these people to reconsider their views in the light of the evidence. All we can do is stop paying attention. It’s going to be difficult, because many members of the deficit cult seem highly respectable. But they’ve been hugely, absurdly wrong for years on end, and it’s time to stop taking them seriously.
4
True, neither Ds nor Rs in Washington tow my line, but I do care about the debt, do want to go over the fiscal cliff, and do recognize that it is a package of austerity policies. It's not the precise package I would have put together if I were emperor, but at least it's a step in the right direction. Some observations:
1. GDP is total national consumption. Recession is a drop in GDP. If a significant part of your consumption is debt-financed, then changing to living within your means will reduce your consumption. The fact that this will be a "recession" doesn't make it necessarily the wrong thing to do.
2. There is a coherent theoretical argument to be made for consumption smoothing, i.e. running a surplus in good times and a deficit in hard times. The US government has spent the past 40 years proving that it can't be trusted to carry out that program.
2b. Often I hear the counter-argument that the bond market isn't forcing us to be responsible, so why not take advantage of that while we can? Also, we will be responsible over the next cycle, at least if you elect the right party. The same people who make this argument seem to have no problem see that a CEO faced with only short term incentives and offered endless bail-outs will make bad decisions. Why doesn't the same observation apply to government?
1. GDP is total national consumption. Recession is a drop in GDP. If a significant part of your consumption is debt-financed, then changing to living within your means will reduce your consumption. The fact that this will be a "recession" doesn't make it necessarily the wrong thing to do.
2. There is a coherent theoretical argument to be made for consumption smoothing, i.e. running a surplus in good times and a deficit in hard times. The US government has spent the past 40 years proving that it can't be trusted to carry out that program.
2b. Often I hear the counter-argument that the bond market isn't forcing us to be responsible, so why not take advantage of that while we can? Also, we will be responsible over the next cycle, at least if you elect the right party. The same people who make this argument seem to have no problem see that a CEO faced with only short term incentives and offered endless bail-outs will make bad decisions. Why doesn't the same observation apply to government?
6
@5: Thanks for the correction! I had always assumed the phrase came from the image of pulling on a rope, but reading up on it I see that's wrong and the origin is much less clear.
7
Saying the Republicans are Randians is to give them too much credit for a coherent philosophy. It's more accurate to say they're angry, and they're afraid. Full stop.
Beyond anger and fear, they don't know what they want. They wait for somebody else to put anything in front of them, to fear or to get angry at.
Beyond anger and fear, they don't know what they want. They wait for somebody else to put anything in front of them, to fear or to get angry at.
8
Republicans actually don't want to cut government. They love spending just as much as Democrats (e.g. Medicare Part D, anything defense related). They do have different priorities, it's true. But they're well aware that actual spending cuts are very unpopular. That's why they're always nebulous in Republican budgetary plans.
So they are closeted fans of government. The difference is they refuse to pay for it. This is the secret of the GOP's success over the decades: that you can get all the government benefits you're used to, and we'll cut taxes too! Personally, I describe their politics as Freelunchitarian.
Realistically, there is no serious party that actually wants to cut government in general. There's a wing of the GOP that believes that and kind of overlaps some with the Tea Party, but they're minuscule and not very influential.
So they are closeted fans of government. The difference is they refuse to pay for it. This is the secret of the GOP's success over the decades: that you can get all the government benefits you're used to, and we'll cut taxes too! Personally, I describe their politics as Freelunchitarian.
Realistically, there is no serious party that actually wants to cut government in general. There's a wing of the GOP that believes that and kind of overlaps some with the Tea Party, but they're minuscule and not very influential.
9
@7 I'm pretty sure they know one thing they don't want: cuts to defense spending.
For some, this is the weird conundrum that government is always bad and wrong, but the military (aka government) is always good and right.
For the more sophisticated, it's the fact that the military is the greatest welfare program (maybe second-greatest after the mortgage interest deduction) for the lower-middle to middle class. It's the employer of last resort, and for a broad swath of people, the military procurement chain is a huge pork trough. Cold War engineering jobs built many an acre of SoCal sprawl, and imagine how many podunk towns like Bremerton would collapse without their base to suckle from.
Abrupt defense cuts would be anti-stimulatory, so maybe now is not the time, UNLESS they are replaced with some better civilian stimulus. (Where did the POTUS put that high-speed-rail plan? Wasn't that here just a minute ago?)
For some, this is the weird conundrum that government is always bad and wrong, but the military (aka government) is always good and right.
For the more sophisticated, it's the fact that the military is the greatest welfare program (maybe second-greatest after the mortgage interest deduction) for the lower-middle to middle class. It's the employer of last resort, and for a broad swath of people, the military procurement chain is a huge pork trough. Cold War engineering jobs built many an acre of SoCal sprawl, and imagine how many podunk towns like Bremerton would collapse without their base to suckle from.
Abrupt defense cuts would be anti-stimulatory, so maybe now is not the time, UNLESS they are replaced with some better civilian stimulus. (Where did the POTUS put that high-speed-rail plan? Wasn't that here just a minute ago?)
10
@8 Very astute analysis! Could it be that this is the Republicans' response to competing with what they think of as the Democrats' crowd appeal? At the same time, they get to pander to their rich anti-tax campaign contributors.
11
If nothing is done, the breakdown is $55 billion in cuts to defense, $55 billion in cuts to non-defense (none for SS or Medicaid or Medicare) and $500 billion in income tax increases per year. It's basically a Democratic plan for severe deficit reduction which is why the Republicans have been trying to steer the cuts into entitlements and tax cuts. As a fraction of GDP, the fiscal cliff austerity would be roughly comparable to what's happened in Greece and Portugal. Things are not looking so great in those places now but they also don't issue debt in a currency they control either.
12
@8 - Although Republicans haven't cut overall government spending in ages, they do want to cut the parts of government they don't like, i.e. the social safety net. The manufactured debt crisis (tax cuts and 2 wars compounded by the recession) has the explicit purpose of starving the beast (a sort of "fiscal straightjacket" according to GWBush) to force cuts in popular programs, transfer more of the tax burden onto the 99% and eventual privatization of the commons as the crisis deepens.
14
Goldy- the same "who cares about the deficit" arguments were made in 1993 when Clinton was balancing the budget. They were wrong then, and you're wrong now. Clinton's fiscal responsibility fueled a decade of prosperity.
15
I think it is hilarious that a small amount of spending restraint and some tax increases that still don't cover the spending, is being referred to as 'austerity'. When monks live an austere lifestyle, they don't go out and buy everything they can afford plus more. They restrict themselves to just what they need. The chance of the government doing anything close to that is about 0%. The correct term for what we are facing with the fiscal cliff is 'less irresponsibility'. Not that we'll get even that.
16
Like the other bubbles...stock, real estate...the only rational decision is to participate in the deficit bubble and to get out of the way before it pops.
17
I don't want to pay 30% for my credit card interest.
I don't want a double-digit mortgage.
I like deducting my health-care expenses and my mortgage interest.
The 90s roared on the back of a technology explosion. All Clinton did is not fuck it up.
Our economy will drown if we have to wait until after the next election to fix this.
I don't want a double-digit mortgage.
I like deducting my health-care expenses and my mortgage interest.
The 90s roared on the back of a technology explosion. All Clinton did is not fuck it up.
Our economy will drown if we have to wait until after the next election to fix this.
18
In 1999, after two decades of Republican hyperventilation, we were finally on track to reduce the deficit. In 2000, we (sort of) elected a vapid Republican who installed his big money cronies everywhere. By 2002 we were in a stupid unwinable war and increased our deficit spending to levels never before seen on this earth.
Why bother trying to balance the budget when we know that anytime we get close the mouthbreathing fundies and their corporate overlords will come fuck it up for everyone?
Why bother trying to balance the budget when we know that anytime we get close the mouthbreathing fundies and their corporate overlords will come fuck it up for everyone?
19
You daughter cares, Goldy.
Or at least, she will when she gets 10 years older.
When she realizes that for a decade you and Obama stuck her with the bill for 46¢ of every dollar you spent, she will care.
When the 11 Trillion in debt you and Obama put on her back starts having to be paid at 13% interest and it takes $2.7 Trillion a year just to service the interest she will care.
She will read the mindless drivel you vomited up these years and marvel at what a dickless worthless piece of shit fuck of a worm you are.
Go ahead, Goldskid;
take a peek into the future;
look you daughter in the face and tell her why it was OK......
Or at least, she will when she gets 10 years older.
When she realizes that for a decade you and Obama stuck her with the bill for 46¢ of every dollar you spent, she will care.
When the 11 Trillion in debt you and Obama put on her back starts having to be paid at 13% interest and it takes $2.7 Trillion a year just to service the interest she will care.
She will read the mindless drivel you vomited up these years and marvel at what a dickless worthless piece of shit fuck of a worm you are.
Go ahead, Goldskid;
take a peek into the future;
look you daughter in the face and tell her why it was OK......
20
@12 Exactly. They have different priorities, like I said above. They mostly seem to involve steering government money towards private corporations (hence, for example, the refusal to allow Medicare to bargain down the price of prescription drugs, or the current hyperventilating over the sequestration cuts to the Pentagon).
Which actually makes the rabid opposition to the ACA kind of hard to understand, since it's a pretty blatant giveaway to the private health insurance industry (albeit not quite as good a deal as Medicare Part D). But then again, I've always assumed that that is actually more of a cultural reaction to Obama personally rather than a critique grounded in any sort of reality.
Which actually makes the rabid opposition to the ACA kind of hard to understand, since it's a pretty blatant giveaway to the private health insurance industry (albeit not quite as good a deal as Medicare Part D). But then again, I've always assumed that that is actually more of a cultural reaction to Obama personally rather than a critique grounded in any sort of reality.
21
Interesting to hear at least one movement conservative publicly declare that Keynes was right, and Obama is the sort of Republican he'd love to vote for:
http://www.theamericanconservative.com/a…
http://www.theamericanconservative.com/a…
Advertisement
Most Commented on Slog
-
All You Motherfuckers Complaining That aPodments Are Too Small at 200 Square Feet by Dominic Holden
-
Portland Voters Are Stoopid by Goldy
-
SL Letter of the Day: Did You Think I Was Going To Tell You Not To Come Out? (PLUS: Help Free Kate!) by Dan Savage
-
Rightwing Anti-Gay French Activist Commits Suicide at Notre Dame Cathedral by Dan Savage
-
Spoiled Rotten: Star Trek Into Darkness by Paul Constant
-
There Are No Atheists In Foxholes by Dan Savage
-
Tornado Truthers by Dan Savage
-
Why They Break Windows by Unpaid Intern
-
America's Epidemic of Toddler-on-Toddler Gun Violence Continues by Goldy
-
Saint Genet Re-Creates "Shoot" by Brendan Kiley
Stranger Personals
The Stranger
RSSSeattle Art & Performance Quarterly
A complete guide to Seattle's current art, film, dance, and theater season.
Facebook
Twitter
Comments (21) RSS